Contact

News & Insights

Safeguarding your Pension and Assets

IHT can be mitigated by giving away assets at least seven years before death. This is not an attractive option, as a person rarely know when they are going to die, and will seldom be content to rely on their relatives to maintain them, so this is generally a non-starter. 

But there is another option, and one which is finding increasing favour; the qualifying non-UK pension scheme (QNUPS). A QNUPS is exempt from UK IHT on the member’s death.

There can be problems if the only reason for setting up a QNUPS is to avoid UK IHT. There is a danger that, where the member is in ill health and sets up the QNUPS with the sole objective of avoiding IHT, HMRC could seek to attack the arrangement. They would do this by trying to claim the pension was essentially a sham and was no different to a normal trust. This could lead to the member suffering a lifetime IHT charge on the transfer into the QNUPS, and a further charge on his death if he were to die within seven years. But there are so many other well-documented advantages in setting up a QNUPS that these additional motives should be easy to point to in order to rebut the suggestion of IHT avoidance should it ever be made. 

The UK Government has shown that it is not beyond raiding UK pensions when it needs money to prop up its own finances. At the moment it needs money arguably more than at any time since the Second World War. This is not unique to the UK Government – most of the EU governments are in the same boat. Anything which puts assets into a friendlier tax climate, allowing more flexibility in their administration and drawing down, while also carrying substantial IHT tax advantages, would seem to be a very attractive proposition which should be grabbed with both hands.

A QNUPS can hold most assets subject to the Trustees consent; UK residential property (but not your main residence), fine wine, fine art and antiques may all be acceptable. Assets which will depreciate, such as cars and yachts, are generally excluded. Your investment decisions should be based on your specific circumstances and objectives. You should always seek advice and consult with a tax and wealth management specialist on how QNUPS can help you in your individual circumstances.

 

Other News

Final salary pensions – why now is a good time to cash in

Juicy lottery-sized sums are being offered to savers to tempt them out of gold-plated workplace pension schemes and into personal plans. We’ve explored whether you should consider taking a final salary pension, as well as the benefits and drawbacks of withdrawing.

What is a final salary pension?

A final salary pension, sometimes referred to as a gold-plated pension, is a special style of retirement fund that is based on your final or average salary.

The main difference between this and a defined contribution pension is that a final salary scheme gives you a guaranteed sum annually for the rest of your life when you retire.

To work out the value of your final salary scheme, consider a few factors: 

  1. Your final or average salary at your place of employment (confirm this with your employer)
  2. Your length of service
  3. The final salary scheme’s accrual rate (this is often 1/80th)

Your final salary pension will take each factor into account, and the resulting figure will be the guaranteed annual sum you are entitled to.

For instance, if you worked somewhere for ten years, and leave on a salary of £100,000, with an accrual rate of 1/80th, you will have a guaranteed retired annual income of £12,500.

It is possible to undertake a final salary pension transfer. Depending upon how long you expect to enjoy retirement, this could be a favourable choice. However, it’s important to consult a financial advisor to make your final salary pension transfer values work harder.

What are the benefits of transferring a final salary pension?

Assessing your final salary pension transfer value, you might consider it worthwhile to withdraw. We’ve outlined the main benefits of taking your final salary pension:

Receive the cash value of your final salary pension

Withdrawing from a final salary scheme allows you to receive a cash lump sum in return for forfeiting your guaranteed income in retirement. This final salary pension transfer value is the main reason to withdraw from a scheme, as it offers you financial freedom.

Remove ties with your employer

This is an especially important point if you’re concerned that your employer may not exist throughout your full retirement. For most, the pension protection fund (PPF) will cover your pension, but, for especially high earners, there is a PPF ceiling of £41,461 (as of April 2020).

Enjoy a flexible income in your retirement

A final salary scheme entitles you to a guaranteed annual income when you retire, but if you go down the route of transferring your final salary pension you will be able to enjoy a little more flexibility in how you receive your income. Usefully, by withdrawing from your final salary scheme, you can choose to take more out in your younger years.

Choose how you want to invest your pension

A final salary scheme is controlled tightly to accommodate all employees and their interests. When withdrawing from the scheme, however, you can take complete control over how your pension fund is invested.

The considerations you should make before transferring your final salary pension

While there are certainly benefits of going down the route of transferring final salary pension funds into various other pots, it’s important to consider what you’ll be giving up:

  • Entitlement to a fixed annual income for the rest of your life
  • A safe income that doesn’t fluctuate with volatile markets and share prices
  • Spousal and family benefits that come with a final salary scheme

 Example: Should I cash in my final salary pension?

An example is Mrs Dee (not her real name), 4 years ago she asked for her final salary transfer values, which came in at £250,000 – a nice sum, you may think. After reviewing all the facts and figures available, however, I advised Mrs Dee to leave her final salary pension where it was, which she duly did.

Towards the end of last year, because of favourable market conditions, I applied again to see the value of transferring her final salary . This one came in at just under £600,000.

Read More

UK Property – Still a Good Investment?

Door painted with Union FlagBack in 2018, for the first time in a decade, rents across the UK fell, which was good news for many. However, it prompted landlords to consider whether the notion of ‘easy money’ was coming to an end. So, what is a good investment property?

Read More

Select your country

Please select your country of residence so we can provide you with the most relevant information:

You are currently viewing the Blacktower Financial Management EU website.

You may be looking for the Blacktower United States website.

Blacktower United States > X Stay on this site

Or choose your country.