Concern raised on offshore pension transfers post-April

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Concern raised on offshore pension transfers post-April

Concerns have been raised over transfers back into the UK of pension scheme funds currently held offshore when new pension freedoms come into effect in April, as industry insiders report an increase in enquiries about moves into onshore Sipps.

The new pension freedoms, set to come in from 6 April will apply to all UK money purchase pension schemes.

HM Revenue and Customs has also confirmed the new pension access options can also be offered by qualifying registered overseas pension schemes (Qrops) without compromising their status, though it is a matter for the schemes and their local jurisdictions what is eventually offered.

Paul Evans, pension technical manager at Suffolk Life told FTAdviser that he had been having “interesting chats” with advisers about transferring back in from Qrops schemes to the UK.

“The two that I’m thinking about, they are clients who had transferred out to Qrops for investment, for tax planning reasons and now with the freedoms that are available for a UK pension from April they are looking to transfer back in because they feel it could offer more.”

Mr Evans said that the the perceivable benefits of transferring back in were really surrounding the freedoms.

He added: “Sipps fit the bill because of course they’ve always been the most flexible and at the forefront of offering new freedoms as it comes through.”

However, Geraint Davies, managing director at Monfort International, warned that it would raise alarm bells if people were moving back from a Qrops to a Sipps as it would raise issues around whether the taxation was correct in the first place for the initial transfer.

Mr Davies suggested that getting people to “double dip” and move back into the UK could be a fee-generating option by some advisers and called on the regulator to examine such transfers.

“We’ve seen some of these things and I’ve urged people to take onboard the tax consequences of a person who was overseas - was it right to move them into a Qrops in the first place if the client is always planning to come back to the UK? They should never have been in a Qrops.

“This is the most complex financial advice there is and you’ve got product floggers encouraging advisers to use them and they are not looking at the basics.”

Adam Wrench, head of product and business development at London and Colonial, said he understands the reasons why people would move from Qrops to Sipps to access the new freedoms, however the decision would depend on the clients individual circumstances.

“HMRC have confirmed that the new flexibility and freedom being allowed post 5 April in the UK will be extended to Qrops. It is anticipated that certain Qrops jurisdictions such as Malta and Gibraltar will quickly adopt the new freedoms within their own... schemes.”

He said that a client’s decision will be influenced by the provider’s jurisdiction and the associated taxation treatment of the pension income when remitted to the client’s country of residence.

Additionally, Mr Wrench pointed out that most Qrops are able to hold pension funds and pay pension income in different currencies, helping to mitigate currency risk and most also allow tax-free cash of 30 per cent compared with 25 per cent in the UK.

Mark Sanderson, chief operating officer at Brooklands Pensions, said that the majority of expat Brits still move back to the UK in retirement, so there has always been a tendency for Qrops members where possible to transfer back to a UK registered pension scheme like a Sipp at some point.

“At this stage there doesn’t appear to have been any major increase in the volume of transfers back to Sipp from Qrops. This is likely because some uncertainty remains over how Qrops jurisdictions will respond with their own legislation and so Qrops members and their advisers are adopting a ‘wait and see’ stance.”

Mr Sanderson added that all this uncertainty reinforces the need for a multi-jurisdiction and multi-product approach to international retirement planning.

ruth.gillbe@ft.com