Originally published in Professional Adviser, 8 September 2011
Tim Bush, Director at Carey Pensions & Benefits Ltd., examines how Qualifying Non-UK Pension Schemes (QNUPS) could help your clients.
In recent months pensions have dominated the news headlines. The underlying theme being that the comfort zone that people of previous generations have experienced with their pension provisions is long gone and many existing schemes, and government fund pension arrangements are no longer going to provide the level of retirement support that people were expecting.
With people now having longer and healthier lives prudence suggests that serious thought be given to ensuring that serious thought be given to maintaining a comfortable lifestyle in their retirement.
There are many opportunities for pension gap to be covered by a plethora of products from the traditional annuity scheme backed by a life assurance product to a Self Invested Pension Plan ("SIPP").
There are some scenarios however, where even these arrangements may need some supplemental support.
Qualifying Non-UK Pension Schemes (QNUPS) came about as a result of a Statutory Instrument introduced in 2010, and these schemes, as expected have opened up further options for the growing expatriate community, but have also provided some opportunities for UK residents/domiciles.
For example: If an individual has a high level of earnings and wishes to contribute to a scheme an amount over and beyond the amount they can and still obtain tax relief, they could join a QNUPS where there is no ceiling of the amount they can contribute (provided the amounts are appropriate to the individuals circumstances, and are part of a bona fides pension planning scheme – so as not to incur anti-avoidance provisions). It should be noted that there is no tax relief available to any contributions made to a QNUPS.
For example: If an individual has built up or received assets (say from an inheritance or a divorce settlement), and was relying on the benefit of these assets for their retirement, outside of a pension scheme, then a QNUPS could, if planned properly, mitigate their exposure to capital gains tax, income tax and inheritance tax. One benefit of a QNUPS is that there is no need for the contributions to come from earned income, but can come from many types of asset from investment portfolios to property to antiques.
A QNUPS allows the following additional opportunities:
The individual may request that the Trustees advance them a loan. The requirements of this would be that the loan is advanced on commercial terms, and is secured, and – importantly – is repaid before any drawdown or lump sum is paid.
A lump sum of 30% of the fund may be withdrawn before retirement drawdown commences.
A QNUPS is a product written under a Trust Deed. It is not necessary to follow a traditional retirement annuity on retirement. The pension drawdown can be made from the funds held based on actuarial rates and after death the funds are distributable to the individuals nominated beneficiaries. The QNUPS is not part of the individual's estate and, subject to proper planning, will not incur UK Inheritance Tax which is currently 40% of assets held above £350,000. Significantly, a contribution to a QNUPS gets this relief immediately and does not need to wait for the seven years that a gift would under the Potential Exempt Tax (PET) rules.
A QNUPS is a trust structure written under Guernsey law which is the leading jurisdiction in the provision of international pension schemes. With a proud reputation for having a robust system of regulation, professional infrastructure, and a cutting edge for innovation and commercial sense in its practice, Guernsey sits in the forefront of locations offering a range of pension solutions, from Employee Share schemes, QROPS and International Pension Plans.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.