Retire in Thailand - Protecting Your Pension

Gordon Brown Reduces the Value of UK Pensions
First, Gordon Brown introduced his stealth tax aboloshing advanced corporation tax credits, which first appeared in his 1997 budget. Terry Arthur, a fellow of the Institute of Actuaries, estimated that this would reduce the value of UK pension schemes by more than a £100 billion in a paper written for the group. A joint investigation by The Independent on Sunday and BDO Stoy Hayward, the specialist accountancy and business advisory group, has revealed that Mr Brown\'s 1997 decision to tax dividends paid into pension funds will have far greater consequences than previously thought. The £100,000 figure represents a reduction of up to 13 per cent in the value of the pension pot a typical employee who pays into a defined contribution scheme could expect to save over the course of their working life. In fact, the amount of companies contributing to final salary schemed have halved under the labour government. On top of this, they decided not to pass an amendment which would have given 8 million women with a partial pension entitlement the chance to make up the shortfall in their National Insurance contributions by making lump sum payments into their national insurance contributions. In fact, pressure is growing for Gordon Brown to step down as James Purnell has become the third cabinet minister to resign according to BBC news, June 5th. In fact, according to their ICM survey, only 29% of the 1,005 adults surveyed thought that Gordon Brown was in touch with ordinary people.
In the latest budget, Gordon Brown has increased the highest rate of income tax to 50% as well as reducing the personal allowances to nil at the higher rate of tax. Double whammy. In a Treasury paper published in April 2003, the Inland Revenue reported to have 16,000 expats on its database declaring a total income of £800 million. Some estimates put it at more than £5 billion. But, you compare this to the £25 billion that RBS moved offshore and it put’s it into perspective, especially when you think that £20 billion of taxpayers’ money went into their bailout. One things for sure, with an ever increasing ageing population, there are not enough young people paying into the state scheme to take care of pensioners. The likely result is a crack down on pension schemes in the future and an increase in taxes (as we have witnessed already). Luckily, for UK citizens, they can transfer their UK private pensions offshore to mitigate tax. The Qualifying Recognized Overseas Pension Scheme (QROPS) allows most types of UK private pensions to be transferred offshore. QROPS was designed with the intention of giving UK expats who aren’t returning to the UK the option of moving their penion to a ‘white list’ country offshore such as Guernsey or the Isle of Man. Not only do you escape income tax, capital gains tax and inheritance tax, but you don’t need to purchase an annuity. This means that your whole pension fund is left to your spouse upon death and then onto your kids should she pass away. Furthermore, you don’t need to report to the HMRC (UK tax office) after 5 years or if you’ve been here for 5 years already. You can even access 25% of your fund when you transfer it and you can include your property within the QROPS, so your kids don’t have to pay inheritance tax on it. Gordon Brown is knocking at the door and it is a mystery how long the Treasury will allow these offshore transfers. But, once they are offshore they will not be held in the UK so the government won’t be able to retract your funds retrospectively. Not all UK pensions should be transferred into QROPS though. There are some excellent final salary schemes with guarantees that may be better off in the UK. The best thing to do is talk to a qualified financial advisor.

richardmalpass@credendaassociates.com