Taking Advice on QROPS and Pension Drawdown

A QROPS pension scheme serves to be an excellent option for those who want to retire permanently outside UK. It comes with comprehensive flexibility in handling pensions. QROPS also comes along with apparent tax as well as investment benefits. Using qualifying recognised overseas pension, the UK private pension owners are able to benefit the most out of it.

Pension drawdown is also called income drawdown/ withdrawal or pension release. It comes along with many benefits, like higher control on where it has been invested, tax efficiency and high flexibility. Moreover you do not have to purchase any annuity within QROPS.

Pension drawdown however comes with some disadvantages also- firstly one has to decide the type of income required along with the additional benefits you would receive. It also causes you to loose the ownership of your funds. You also loose the death benefit; moreover you do not have investment growth anymore. Finally, once you choose your income type, it cannot be altered again.

Since all these schemes and plans are very complicated, it becomes important to discuss them out with a reliable financial advisor. Wrong choice of schemes can lead to problems in future; in the same manner right choice can help you streamline your demands and financial provisions with much ease. Qualifying recognised overseas pension especially needs to be chosen with much care. There are many financial advisors who advise on the QROPS plans. A wrong choice might result in significant loss owing to penalty demanded by HMRC. Many have suffered enormous fine when the scheme they choose were not meeting the HMRC guidelines.

Choosing From the QROPS List

QROPS list is a list of QROPS pension schemes which you can use for transferring your pension. One interesting fact here is however that even the presence on the list doesn’t guarantee confirmation of verification by the HMRC.

HMRC clearly mentions that in case the scheme had been wrongly mentioned in the list, the amendments can be made later also and severe penalties can be imposed because of the wrong choice made. Most of the financial advisers recommend various products and are more focused towards finding the right products. This has led to many penalties in the past.

Many times the product might seem lucrative and a good option, this doesn’t mean they will surely attain approval. If you opt for QROPS appearing on the QROPS list, not approved by HMRC you can face tax penalties more than 55%. The approved QROPS are those which are within the rules and regulations of HMRC as well as the local pension rules. As a result it is true that good research work and comprehensive study in the situation is necessary.

Following are the advantages of a good qualifying recognized overseas pension scheme:

· You can control considerable tax reductions in your pension and you are able to consolidate your pensions into one qualifying recognized overseas pension scheme.

· You are able to pass the pension funds to the beneficiaries and thus are exempted from UK Inheritance Tax.

You have pension trustees as well as scheme provider closer; you do not have to purchase an annuity within qualifying recognized overseas pension scheme.

QROPS Pensions – Maximum Returns With Comfort

When the Her Majesty’s Revenue and Customs, HMRC announced the launch of the QROPS plan, the main intension was to provide the pensioners a new option to invest and use the existing pension funds, and use it more profitably. QROPS stands for Qualifying Recognised Overseas Pension Scheme, in which the pensioner has the option to transfer his or her pension funds to another country. Such an easy transfer of QROPS pensions enable the pensioner to use the funds for investment and other sectors, which can ensure better returns and better margin. Additionally, such QROPS pensions scheme also provide tax benefits, which is one of the main features of this plan.

However, having said that, there must be a mention of the inherent risks related to the investment in such QROPS pensions fund. Investment is always subjected to the existing market risks and prevailing interest rate, besides various other financial factors which actually determine the returns from such investments. It is always advisable to rely on an expert guide or consultant who is well versed with the rules governing QROPS pensions, and have extensive knowledge of the procedures and plan. Such consultants often have a direct contact with the leading QROPS providers. QRPOS providers are companies and financial institution, who provide the investment options for pension funds, via QROPS scheme.

The consultant with whom you will have an agreement and understanding, shall study the market on your behalf, and understand your existing requirements and expectations, and according suggest you the appropriate QROPS provider, who can ensure that your pension funds are utilized the right manner. There are several options which are advertised by the QROPS providers. But, it is you who will need to understand and comprehend the rules governing the pension fund’s investment portfolio, and take the proper decision of investment in the most useful and relevant investment portfolio.

The QROPS pensions plan was actually devised for those pensioners, who wish to relocate to any other country besides UK after retirement. However, keeping in mind the expats and citizens from other countries who have worked in UK, and have accumulated pension funds, this scheme was extended to citizens of all countries, provided they have worked their tenure in UK, and have pension funds deposited in their bank accounts. For further and detailed information related to QROPS pensions, it is always advisable to contact the best QROPS consultant for better options.

October Pension Drawdown Reviews and all-time low gilt yields

October 2011 sees a record low gilt yield of 2.75% as a basis amount to use when calculating pension drawdown income. Actually starting pension drawdown or QROPS or triggering a review of existing income should be approached with caution. Although there is no guarantee that the gilt yield will increase in the coming months, a review now could lock a client in to the lowest ever pension drawdown or QROPS drawdown rate.

Sometimes a review is unavoidable, such as reaching the end of an existing 5 year (or 3 year) reference period, and for those on the old, pre 6 April 2011 income limits of 120% of the older GAD tables, moving on to the new basis of 100% of the revised GAD tables along with the drastically low gilt yield could result in a significant drop in income.

Take a a 60 year old crystallising a pension back in October 2006 with a fund of £400,000. The maximum income they could have got, based on 120% of the GAD rate would have been £29,760 pa. Coming up to their 5 year review in October 2011 and aged 65 years, the new GAD tables and the post April 2011 maximum 100% GAD would give a new maximum pension drawdown or QROPS drawdown of £23,200 pa on the same fund of £400,000. Take a fund that has fallen by to approx. £330,000, then the new income level would be £19,140 pa. - A pension drawdown review dropping income by over £10,000 (35.68%).

Reviews of the maximum income are also trigged:

(a) When moving further funds into pension drawdown within the same arrangement,
(b) When using some of the pension drawdown fund to purchase an annuity,
(c) The start of the next pension drawdown year when transferring a pension drawdown fund still in an original 5 year reference period,
(d) The start of the next pension drawdown year if reaching 75 years after 6 April 2011,
(e) The member requests a review on their next pension drawdown year anniversary

The gilt yield to use for the following month is determined on the 15th of the preceding month, so shortly October for November will become clear.

Many pension providers and pension drawdown holders are pushing the government for reinstatement of the 120% limit.

Capped Pension Drawdown and QROPS pensioners - falling income

Many pension companies and QROPS providers are warning pensioners in capped pension drawdown of potential drops in retirement income. The reasons are:
•Recent investment losses for those holding asset backed investments such as equities.
•Falling gilt yields are affecting the amount that can be drawn from a fund,
•Capped pension drawdown rules post April 2011 reducing maximum drawdown from 120% of the Government Actuary's Department (GAD) rate to 100%.

For those with QROPS and still not non UK resident for more than five complete UK tax years will still see the influence of UK pension legislative changes.

April 2006 saw the yields used in calculating maximum income as high as 5.25% and only once fell below 3.5% to 3.25% in April 2009. Recent sentiment and global economics have led investors to flock to safe havens as the equity markets plummeted. Yields on 15-year-gilts fell to 3.25% in September.

An example for a 70-year-old male, a reduction of just 1% in gilt yield reduces income by 10%. Gilt yields are currently 2.75% so people with reviews in the autumn or those taking benefits for the first time will bring down the maximum retirement income that the member can take from their pension funds each year.

Those needing advice will be pensioners in pension drawdown or QROPS for some time and taking maximum income. Changes to GAD rates, gilt yields, together with poor investment returns mean that those who started taking income five years ago have already seen incomes reduced substantially.

No Rise in Interest Rate- UK Unemployment Count Grows

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.
Cash and income timing from a UK Pension income drawdown, flexible pensionsor QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions,income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).

The release of the MPC minutes confirmed that policy makers would not be increasing Great Britain’s historically low interest rate. A unanimous decision, 0-9, indicated to the markets that the UK is unlikely to respond to consistently high inflation, and the committee reiterated its assertions that short term factors such as commodity prices are the key drivers.
The UK unemployment count did go up for the month of July with a 17.1k increase. On the back of early August’s London riots the Government has made £20million accessible to affected councils precisely to assist regeneration and job creation, but one can explain this unexpected increase as being reflective of an increase in the graduate job market over the course of the summer.

Talks within Europe, following the meeting between Germany’s Angela Merkel and France’s Nicholas Sarkozy, focussed on the potential introduction of a financial transaction tax – and this focus on the systemic and structural review of the EU saw sharp movements in the value of the single currency. From midday BST GBP/EUR rose from 1.1352 to over the 1.1450
before the close, which confirms that volatility still remains prevalent. The 1.2% year on year European CPI figure, coming in 0.5% below expectations, confirms that key economies such as Germany are seeing a slowdown of sorts. Across the pond the US posted a better than expected Purchasing Price manager’s Index, and when coupled with assertions that the Fed will keep interest rates on hold for as long as two years, suggested earlier in the week, we may see an increase in the effects of inflation withinworld’s largest economy too. GBP/USD has breached the 1.65 mark, and did so even before the European close. Against the EUR the dollar holds above 1.44, despite poor earnings figures coming through from a number of European companies, meaning that the day begins with European equities beginning firmly in the red.

Today brings more economic information for the United States, with Consumer prices, unemployment and homes sales coming under close scrutiny. With the majority of this information being released around midday it would seem that the focus will not be on European discussions, but this could prove to be a choppy day for the world’s reserve currency against the majority of majors.

IN THE UK
• The Bank of England’s Monetary Policy Committee votes unanimously to hold interest rates at record lows
• One of the MPC’s members, Adam Posen, as usual votes in favour of an increase to the asset purchasing facility; and the potential of further Quantitative Easing remains given the sustained level of inflation
• Average earnings in the UK rise for 2.3% to 2.6%, which both beats the previous month’s and exceed expectations. This does not account for the increase in unemployed graduate numbers, which is visible through and increase in the UK unemployment count
• Sterling shows a highly reactionary move; with a full cent change over the course of the European sessions. GBP moved from 1.1350 to 1.1450 over the course of the afternoon, despite European decision makers showing unity over the route the EU must take to reform its financial and debt policies

ELSEWHERE
• Consumer prices in general came through on par for the Eurozone, however the core price index did should a fractional drop below the expected 1.7% increase
• The majority of focus was on the notion of Eurobonds and their uses in controlling the contagion affect across the Eurozone. Whilst EUR/USD traded within a relatively narrow range (1.43809 – 1.4452) the market remains uncertain, and the ban on short selling has done to curb the drop off broadly across the European exchanges.
• The USD dropped considerably against sterling to reach a floor at 1.65536, prompting the view that risk had returned slightly to the market place, and that the UK was still the market of choice for credit and debt derivate contracts
• Although the CHF lost ground against GBP, it has been conclude that the SNB has been unsuccessful in curbing its significant strengthening, and there was no talk whatsoever of a currency peg, which had been on the cards earlier in the week

DATA TO LOOK OUT FOR
• US core CPI and unemployment figures should give a more detailed figure of the scale and effects of inflation on the US grass roots economy
• US existing homes sales are expected to exceed 4.77M forecast to reach a predicted 4.91M level
• A level figures released in the UK will reveal the effects of the secondary education uptake for the year to come, as more applicants and fewer places, coupled with a tuition fee increase may see an increase in the number of unemployed young people entering the market


Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

Sterling Near Two-month High- Euro Hits the Bottom-Gerard Associates

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension income drawdown, flexible pensions or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).

Sterling hovered near a two-month high against the euro on Tuesday on renewed worries about Eurozone peripheral debt and risks of contagion, although it failed to gain much traction despite better-than-expected UK construction activity data. The euro fell as low as 86.99 pence (€1.1495), a level last struck on May 31, this was mainly headed up by Italian bond yields hit their highest level in the euro’s 11-year lifetime, ominously reaching the same level as Spain's in a sign that Rome is overtaking Madrid as the main focus of investors' concern about debt sustainability. Italy's stock index fell to its lowest in more than 27 months, dragged down by banks with a heavy exposure to Italian debt. European shares hit a 9-month low amid worries that slowing economic growth will make it even harder to overcome the Euro zone's debt

troubles.

Sterling traded to a low of $1.6223 versus the dollar, mainly due to further news being released from across the pond regarding their debt ceiling meetings. Some traders have said sterling could find support from the news Hong Kong's CKI has agreed to buy Northumbrian Water Group in what could be the biggest takeover this year of a British-listed company. UK construction PMI data for July beat expectations with a reading of 53.5 of which showed that the sector is in expansion, compared to a forecast of 53.0, but the positive impact on sterling was limited as construction makes up less than 10% of the economy. The outlook for the UK is still lacklustre after data on Monday showed the manufacturing PMI shrank for the first time in two years, pushing sterling down from a two-month high of $1.6477.

"The data has held up better than people expected but the fixation is on manufacturing data and the services data tomorrow. The market seems to be focusing on UK growth being softer," said a FX strategist at Credit Agricole. "Against the Euro, sterling is going a bit better but it's approaching its 200-day moving average at 86.63 and last time we bounced just above that." Across the pond there was no major impact data being released, other than consistent feedback regarding meetings concerning the US debt ceiling. However the medium and low impact data that was released all missed expectations. It would seem that the market will be looking towards the next few days where we have a host of high impact data being released from the US, Eurozone and the UK.

IN THE UK

• Sterling posted a near 2 month high against the euro at the rate of €1.1495.
• Sterling retreated further against the US Dollar, posting a low of $1.6223.
• Sterling’s Construction PMI data beats expectations posting a figure of 53.5 against a figure of 53 showing the sector is in expansion.
• Outlook for Sterling is still poor based on Monday’s Manufacturing data that was released, and massively missing expectations posting 2 yearly lows.
• The pound receives a welcome lift as PMI Services, the most important of the PMI’s, is released this morning well above expectations at 55.4.

ELSEWHERE

• Euro Price Producers Index month on month narrowly misses expectations posting a figure of 0% against a forecast figure of 0.1%.
• US Core PCE Price Index month on month misses expectations posting a figure of 0.1% against a forecast figure of 0.2%.
• US Personal spending month on month massively misses expectations posting a figure of -0.2% against a forecasted posted figure of 0.2%.
• Swiss Retail Sales year on year posts a vastly better than expected figure of 7.4% against forecasted figures of 1.6%.
• The US have been put on negative outlook by Moody’s although maintain their AAA rating, however S&P say there is a 50% chance they will lose top tier rating.
• Prospects for the Eurozone and the US look equally bad as poor reports regarding Spain and Italy filter around the markets, the US despite having the debt limit raised is not out of the woods, poor GDP and ISM Manufacturing figures compound this and prompt investors to remain on a risk off strategy.

DATA TO LOOK OUT FOR

• BRC Shop Price Index year on year expected to beat previous years reading of 2.9%.
• Australian Retail Sales month on month forecast to post a figure of 0.4%.
• Euro Services PMI expected at 51.4.
• US ADP Non-Farm Employment Change expected to post a figure of 101k ahead of the Non-Farm Payroll figures on Friday this week.
• New Zealand Unemployment Rate expected to be released tomorrow at a forecasted figure of 6.5%.

Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

QROPS

Factors affecting currency exchange and need for sensible investment

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension income drawdown, flexible pensions or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).

Sterling climbed to a near three week high against a broadly weaker dollar which was still being hurt by Ben Bernanke’s comments in the recent press conferences. Sterling hit a three week high of $1.6195 early in the day as investors continued to sell the dollar after Moody’s warned it could cut U.S ratings as Federal Reserve Ben Bernanke hinted at further policy easing.

Gains for sterling are expected to be limited, with many not ruling out the prospect of further quantitative easing in the UK. “After getting hit hard earlier this week, sterling seems to be very resilient and coming back bid” said a London based stock trader. “I must say this has surprised me more than a little. But think it will trade in a range and would expect to see sellers in earnest on any flirt with the 1.62 area”.

Sterling’s increase against the dollar has primarily been off the back of a bearish outlook for the U.S dollar and has had little do with any signs of improvement in the UK economy. Data on Wednesday showed a sharp rise in the number of Britons claiming unemployment benefit, adding to concerns that stale growth prospects may prompt more Bank of England policymakers to call for additional policy easing. The Italian bond auctions did little to reassure the Euro, despite the bid/cover ratio going reasonably well. The EUR/USD had been supported in Asia gaining to $1.4280, the main cause for this rise was as a result of Bernanke’s comments. The Italian Senate passed through a tough austerity budget, including cuts of 48bn euros. Italy has one of the largest debt mountains in the Eurozone and wants to avoid any need for a bail out. Italy raised 2.97bn euros through the sale of 15 year government bonds on Thursday, but had to offer a 5.9% rate return an all-time high for such bonds.

Across the pond an unexpected rise in auto buying helped US retail sales edge up in June, but consumers remained cautious amid high unemployment, rising inflation and economic uncertainty. Retail sales were up 0.1% in June beating the expectations of a 0.1 percent fall and beating revised a revised 0.1% decline in May.

IN THE UK

• GBP/USD hits a near three week high to 1.6194, but fails to break the $1.62 level
• Sterling gains are still being limited as analyst still speculate whether UK will need further Quantitative Easing
• The pound remains around its 100 day moving average 1.1372 against the euro, despite the recent Eurozone woes many analysts believe GBPEUR will remain low based solely on interest rate differential between the two central banks.

ELSEWHERE

• EUR CPI year on year meets expectation posting a 2.7% year on year.
• More news this morning about US credit ratings, S&P have said they have put US on negative credit watch, suggesting a 50/50 chance of losing their AAA rating. This could happen as soon as in the next month if the debt talks don’t produce an adequate result soon.
• In contrast alternative agency Fitch leaves US as stable outlook.
• UK press have reported this morning that the Eurozone has only 48hrs to agree settlement on ongoing debt issue or could result in two tier euro, I would however take that comment with a pinch of salt given the background work involved in such a plan could take years.
• Italy prepare for a confidence vote on austerity measures ahead of stress tests this afternoon.
• US Retail sales month on month beats expectation posting a 0.1% against a forecast -0.1%
• Ben Bernanke testified to congress for the second day yesterday saying that QE3 is a card he will only play when he needs to, there are other tools available to spur growth and the Fed wants to see if the economy can rebound on its own.
• US core Retail Sales misses expectations posting a figure of flat (0%) against a forecast 0.1%

DATA TO LOOK OUT FOR

• Eurozone trade balance is released this morning, little change is expected and subsequently should not affect the markets too much.
• US CPI is released at 1.30pm and expected to remain at 3.6% for the year.
• US Empire State Manufacturing Index is published at 4.20, a substantial rise on last month’s -7.79
• Headline data today is the Eurozone bank stress test results, they are expected at around 5pm and have been organised to give reassurance to investors that EZ banks are performing adequately and some of the recent debt rumours of Spain and Italy in particular are unfounded. Expect volatility if the results show that too many banks have been hiding skeletons in their closets.

Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

QROPS