Rich Snail

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What in the world is this mouthful you may ask. This is a specific type of pension available to former UK tax resident - if you have worked in the UK, paid tax and are now living outside of the UK this will be interesting for you, and potentially highly beneficial.

What does this mouthful means?

Qualifying Recognised Overseas Pensions Scheme (QROPS) are a relatively new invention. In April 2006, the UK tax authorities approved that former British tax resident and British Expatriates could move their pension benefits to QROPS. The authorities improved their stand early this year, and since then, a steady increasing number of expat - and advisers - are seizing this opportunity.

What are the benefits of a GROPS?

• No UK income tax on the pension benefits after you start drawing (whereas most UK pensions are taxed at source – even if you are resident overseas in most cases)
• You have the option of draw-down directly from the fund  (means you don’t have to lock everything into an annuity)
• Upon death, the fund balance can be passed to your realatives - Spouse, children, etc.
• You can be actively involved in the management and strategy of your pension fund at all times
• Any death benefit to your estate can now fall outside UK IHT
• You can combine multiple pensions into one single scheme, thus saving considerable admin costs
• Tax Free cash element can now be 30% of the fund, subject to the jurisdiction for the QROPS (instead of 25%)
• You can take benefits from age 55 (instead of 65)

Sounds great doesn’t it?

Yest it does. It actually is one of the few expatriate tax schemes which is really popular with everybody. The benefits are important, and most can benefit from it. But you still need to go through your estate to evaluate whether it is beneficial to you or not.

Once instance where you may be better of staying in the British system is when you have subscribed to a pension plan with benefits such as guaranteed annuity rates which were subscribed when interest rates very high - or at least much higher than lately.

Should you wish more info, do not hesitate to drop me a line

Offshore centres are trying to change their image and perception. Some would like to not be called offshore, like the Isle of Man or Guernsey, while others interjected to the International Monetary Fund (IMF) to  Integrates the Offshore Financial Center Assessment Program.

It is true that expressions like “offshore” and “tax haven” have no agreed standard definition, which is a problem. I understand why they prefer to be called “international finance centre” - the expression is a lot less tainted than “offshore”.

Why, of why?

No, it doesn’t. It simply is a result of a great PR to answer the mis-conception the offshore term has received over the past few years due to international efforts against money laundering, tax evasion and terrorist funding. Hollywood did not help either…Not that these are not serious crime, but their number pale in comparison to the number of legit investments and accounts held in “offshore” jurisdiction. Therefore, offshore centres are trying to not throw the baby out with the bathwater by changing their brand image. Pretty smart.

But does it really makes a difference?

No it doesn’t. The fact that we name something differently does not change its substance. I don’t want to go philosophical here, but a word is slightly more than the signification one gives it. Hence changing their appellation from offshore to international finance centre does not change the way your account or platform work, its benefits and restrictions.

Time will tell…

At the end of the day, this will only succeed if people stop using the term offshore to designate such centres. And this battle is far from over! Old habits are hard to get over - especially in england!!

Royal Skandia is one of the big gun when it comes to offshore saving products. They built their reputation on offering a wide choice of funds to play with and a great aggressive marketing strategy targeting advisers. They have recently released a bunch of new funds. Each link will lead you to the related fund’s fact sheet.

• JF ASEAN
• JF Australia
• JF Korea
• JF Taiwan
• Franklin MENA
• HSBC Climate Change
• HSBC Brazil Equity
• HSBC Korean Equity
• HSBC Russia Equity
• GAM Star Continental European Equity
• GAM Star US All Cap Equity

A pretty good seletion. I particularly like the ASEAN, Climate change and Brazil Equity ones. They offer good upside and may not suffer too much from the current credit crunch. But they are for pretty agressive investors…

Many advisers recommend expatriates to consider shifting or establishing their portfolio in offshore jurisdiction. One of the most popular is the Isle of Man (IoM) - a small celtic island located between England and Ireland. Why is that so?

The Isle of Man is a ’so-called’ low tax economy with no capital gains tax, wealth tax, stamp duty or inheritance tax. This means that for non-resident (i.e. if you don’t live there) you don’t pay tax. This alone explain why so many people like the IoM. As simple as that. But there is more to this tiny island than a simple tax-attractive piece of land.

In order to become one of the leading offshore center, they had to set in place protections laws that ensures your money will still be there when you will need it. There is no point building up wealth if something has gone wrong along the way with the company looking after your money. Therefore, the IoM protections mirror or exceed the investor those you will fin in jurisdictions such as the UK, the US and Australia.

Two that are particularly significant.

1975 – Plan Holder Protection Act
The first is the 1975 Plan Holder Protection Act which was updated last in 2000. It is there to protect investors against losing their money if their company did fail. The way this works is that each quarter, financial institutions have to pay a premium based on the size of funds they are managing into a central provident fund managed by the IOM authorities. This fund then guaranties 90% of the value of your account by law.

1996 – Financial Service Act
The second is the 1996 Financial Service Act of IOM. It regulates and supervises financial companies to be sure that investor interests are safeguarded. As an example, that they have to submit audited accounts every six months instead of annually like they would in the UK or US for example. This is for the IOM to be sure that client monies are properly accounted for. Another part of that law is that all assets under management by those companies must be held by a third-party custodian to be sure that a company can’t use client money to bail itself out should they experience financial difficulties.

On top of all that, the Bee Gees were born there! How not to like such a place !!

Living abroad is exiting. Everyday is a new adventure, a new discovery. Of course, some discovery are exiting - others are not. Most developing countries do not yet have comprehensive social security system. And while many expats are prepared for medical, some do forget that our social security back home are a lot more extensive than just medical.

Let’s quickly review the scope of a good social security system - I’m not talking US here

Medical Cover - Covers everything related to medical (duh!), maternity, Emergencies etc.

Retirement - Help you plan your retirement. Some system promises you a specific monthly benefit at retirement, others provide you an individual account from which you can draw an income later on.

Critical Illness Cover - Kicks-in and provide you with a regular income should you suffer from a critical/incapacitating illness - i.e. you can not work anymore but still need to make a living

Income Protection - Provides you with an income were you to lose your job

Family Cover - Helps you with some reduction or tax benefits in order to ease the burden of raising childs

Social Aid - Financial help for those who are in difficult situations due to their handicap, health, social or economic difficulties when other system can not cover them or are insufficient.

I put them down in order of importance from an expat point of view.

The Medical cover is maybe the easiest to grasp for everybody.

The retirement one also is quite obvious for many, usually those whose social security system provide them with an individual account grasp this concept very fast- they are already used to be responsible for their own future income.

Critical Illness cover and income protection are less top of mind for many. Yet they are very important. Especially the critical illness cover. Statistically, we have more chances of suffering from an incapacitating trauma than we have of dying young. Yet most people are familiar with life insurance, but not with critical illness.

The last two are more macro concerns. They are paid for by our taxes and we pay for those in our country of residence.

So - did you cover the 4 pilars of social security? Or did you simply go for the adventures?

Following an agreement signed in December 2007, Scottish Provident International Life Assurance (SPILA) business has officially changed ownership to become part of Royal London. This integration certainly reinforce the Royal London Group position as the UK’s largest mutual life and pensions compan, but what does it mean for you, and how does it affect your SPILA Plan?

Nothing changed really. You don’t need to take any actions regarding your plans, as there are no changes to the benefits, features, conditions etc. You even keep your policy number and every other details remain identical - even contacts & addresses.

Should you wish to get more information regarding this, you can either contact me good self, or get in touch with SPILA directly.