International DB pension transfers – the Brock Personal Pension Plan
In an increasingly mobile world, more and more individuals have accumulated pension benefits from periods of working outside their home country. This is particularly true for those who have worked in highly mobile businesses such as shipping or the extractive energy sectors.
In many cases, such persons would have been enrolled into a defined benefit (DB) pension scheme. Often these arrangements are referred to as overseas or international DB schemes. If the individual is a long serving employee, however, they may have also built up significant guaranteed DB pension benefits during their time working in their home country too.
However, for those who potentially have a guaranteed source of income secured from a DB scheme in their home country, the flexibilities of a defined contribution (DC) scheme may be a more attractive option for any additional international DB entitlements that they may have accrued. These flexibilities include the ability to withdraw funds in a more ad hoc fashion, freedom of investment choice and the ability to pass on 100% of remaining funds to loved ones on death.
Transferring from a defined benefits (DB) scheme is always a complex area and one which requires careful consideration and specialist advice, specific to an individual’s personal circumstances, objectives and motivations and as such it will not always be the best course of action.
Depending on the client’s circumstances and those of the particular international DB scheme they are transferring from, Sovereign’s Brock Personal Pension Plan or Conservo International Retirement Plan may provide suitable DC schemes for them to transfer their accrued benefits.
Both plans are managed and administered by Sovereign in Guernsey and, assuming the member is non-Guernsey resident, all benefits paid from the schemes will be exempt from income tax in Guernsey. This means that the only tax consideration for the individual will be in their country of tax residence.
For any client who is a UK tax resident or UK national, they may wish to consider the Brock Personal Pension Plan because this scheme satisfies the conditions outlined by HMRC for it to be considered as a Qualifying Non-UK Pension Scheme (QNUPS). As a result, and assuming it has been established for retirement planning purposes, it should be afforded the same exemption from UK inheritance tax as is afforded to a UK-registered pension scheme.
By way of example, let us consider John Smith, a UK national and resident, who is 53-years-old and is planning to retire in two years’ time following a long and successful career in the oil and gas industry, which included some time working in Africa and Asia.
During his time working outside of the UK, John was enrolled into an overseas DB pension scheme that is managed and administered from Bermuda. Due to his intention to retire shortly, he has contacted the administrators of the scheme and he has been provided with an overview of the options available to him, which includes transferring his cash equivalent transfer value to a suitable receiving pension arrangement.
John has existing retirement savings held within a UK registered pension scheme and due to his uncertainty around whether he will remain resident in the UK, he is considering transferring the overseas DB pension entitlement to an approved overseas pension arrangement, and as such, he is seeking financial advice to determine a suitable type of receiving scheme in a suitable jurisdiction.
His financial adviser is seeking a solution that will provide John with a robust, tax efficient, approved pension arrangement that will be acceptable to the existing scheme administrators and will also be suitable for a current UK tax resident and UK national individual.
The financial adviser recommends that he should apply to become a member of the Brock Personal Pension Plan in Guernsey because it is an approved pension plan in Guernsey, which will therefore be exempt from any Guernsey taxes for a non-Guernsey resident that also meets the requirements to be considered as a QNUPS. As such it should be exempt from UK inheritance tax.
It is a robust pension structure based in a stable jurisdiction with specific pension regulation, as Guernsey is recognised as a centre of excellence in the administration of international pension schemes. It is also open to non-Guernsey resident members, meaning regardless of where John travels or moves to, he can remain in the plan.
The Brock Plan is able to accept inward transfers of pension benefits and allows for a wide range of investments in multiple currencies. It further provides flexible benefit options once an individual reaches minimum retirement age.
Before any UK resident or national can be admitted into the Brock Personal Pension, they are required to obtain and provide Sovereign with positive supporting UK tax advice. For some international DB schemes, there may also be a requirement for the individual to obtain a report from an independent source prior to the transfer being authorised by the ceding pension scheme.
Sovereign, via its partnership with Pentech and its exclusive International Financial Adviser Support (IFAS) programme – a unique web-based service that provides IFAs with access to live data and fast responses to queries about existing UK or international pensions schemes for the benefit of their clients – can assist with the provision of such a report for clients of introducing IFA firms.
For further information on either the Brock or Conservo plans, please contact your local Business Development Manager or contact Sean Gillease, Business Development Manager for Guernsey.
