Pen­sions push hits new olim

The Jewish Chronicle - - FEATURES - BY SI­MON BENARROCH

PHILLIP HAM­MOND’S first bud­get has re­sulted in the loss of one of the most sig­nif­i­cant tax breaks for olim. One line in his speech will cost fu­ture olim mil­lions of pounds in ad­di­tional tax in fu­ture. By ini­ti­at­ing a 25 per cent up­front charge on pen­sion trans­fers (for non-EEA res­i­dents) the Chan­cel­lor ef­fec­tively re­moved qual­i­fy­ing over­seas pen­sion schemes (QROPS) from the tax-plan­ning tool­kit of Bri­tish olim.

QROPS are off­shore pen­sion schemes. Olim could trans­fer their pen­sions to an off­shore ju­ris­dic­tion such as Malta or Gi­bral­tar and then not pay any in­come tax for 10 years — and, more im­por­tantly, there would be no tax on death. This was a very at­trac­tive propo­si­tion, used by many olim.

As a re­sult of re­cent UK changes to pen­sion flex­i­bil­ity, it has been pos­si­ble to move your UK pen­sion to a QROPS and take out 100 per cent of the fund, tax-free. I was of­ten asked by po­ten­tial clients if they could move to Is­rael and take all their money out of their pen­sion tax-free. Al­though it might have been within the let­ter of the law, it seemed to be against the spirit of pen­sion leg­is­la­tion and there­fore not some­thing I en­cour­aged. Peo­ple re­ceive tax relief on pen­sion con­tri­bu­tions to in­cen­tivise sav­ings for re­tire­ment and to pro­vide an in­come for life. Tak­ing 100 per cent of the fund and not pay­ing tax is not what HMRC had en­vis­aged when giv­ing up­front tax relief. This has been hap­pen­ing in some parts of the world for the past six to 12 months. It is surely not a co­in­ci­dence that after 10 years of a work­ing QROPS regime, the rules have been rad­i­cally tight­ened, within months of the “abuse” start­ing. There is a les­son here. If you push the rules too far and HMRC sees what it feels is abuse, it will clamp down on it. It is also worth men­tion­ing that those peo­ple who moved to a QROPS in the past can con­tinue with the ben­e­fits they cur­rently en­joy.

So what should olim now do with their UK pen­sion funds? There are two as­pects to this ques­tion — the tax ef­fi­ciency of the pen­sion and the investments inside the pen­sion scheme. Clearly pen­sions are not go­ing to be as tax-ef­fi­cient as they were for olim and peo­ple may con­sider mov­ing their

One line of a speech has cost fu­ture olim mil­lions

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.