Financial planning Danny Cox
is Head of Advice at Hargreaves Lansdown Call 0117 900 9000 or visit
www.H-L.co.uk
Cream of the QROPS?
I have been advised to transfer my UK pension schemes to a QROPS (Qualifying
Recognised Overseas Pension Scheme). Is this a good idea? I am 53 and live in France. GRAHAM LEDGER, BY EMAIL
QROPS were designed to allow pensions freedom of movement for individuals retiring
ISA and easy does it…
I am in the process of moving to Australia and want to know what to do with my stocks and shares ISAs. Do I have to cash them in or do I have the option to transfer them? SUSY ROWAN, BY EMAIL
You will not be able to transfer your ISAs to an Australian account. However, tax effi cient
wrappers such as ISAs can be retained [in the UK] when you move abroad. ISAs shelter your cash or investments from any
further tax so clearly have tax advantages over other types of investment. You can continue to pay into an ISA while you are still a UK resident for tax purposes but cannot normally contribute once you have emigrated. You will need to notify all the fi nancial institutions you hold ISA investments and/or savings with that you are moving abroad and provide them with your new address. Importantly, you also need to consider how you might deal with them in the future from such a distance. ISA providers that offer online access to your account have signifi cant advantages over those
that do not, as do those that will issue reports and contract notes via email rather than by post. Generally the ISA fund supermarkets provide these services alongside online trading and account administration. You should also fi nd out if your ISA provider has a phone line for clients abroad that doesn’t cost a fortune to call and when you sell your investments, whether you receive a cheque or the proceeds can be paid directly into a bank account. Maintaining a UK bank account usually helps with dealing with the proceeds of investment sales. If you have accumulated ISA investments with a number of different managers over the years, it is likely that your dealings when you go abroad will be more complicated than they need to be. Consolidating your investments into one ISA
service will make things easier and help you make more of your money. You should do this before you go – few providers will accept new accounts from non-UK residents.
Once in Australia you should consider the tax
effi cient savings products available to you there to complement your ISAs.
abroad. QROPS is still a developing market and there are some pitfalls. QROPS can have potential advantages over a UK pension, such as investment fl exibility and ability to eliminate currency risk. QROPS had previously offered more fl exibility in taking pension benefi ts although this distinction has largely disappeared since the UK’s removal of compulsory annuity purchase. Tax advantages on taking pension benefi ts are
unlikely to be signifi cant as pensions are generally taxed on the basis of an individual’s residency. It is important to say that a UK pension is designed to provide an income in retirement and the generous tax breaks available are only offered with that principle in mind. For a QROPS to obtain qualifying status, it has to adhere to this principle, which normally means that benefi ts are paid in the same way as UK pensions, i.e. 25 per cent tax-free cash and the balance as a taxable income. QROPS that claim to be able to pay the whole fund as tax-free cash, and/or invest in residential property are not adhering to the spirit of the legislation and are likely to be subject to close HMRC scrutiny. There have already been cases of some QROPS being closed down. Your advisers should be making it clear to you the benefi ts of transferring to QROPS based on your situation – and that these benefi ts should outweigh the costs of the advice and the QROPS product charges.
JUNE 2011 A PLACE IN THE SUN 67
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