Thought you may be interested in some pension transfer issues -
something that hits the migrants pocket.



Hidden costs in pensions can be controlled by exercising prudent
planning pre-departure. The first 3 alone account for 6% of fund value
for starters.



• The hidden costs of bank charges on transfer, (Factor in 2% of
fund value – it should be 0%) – its incredible how much is lost at
this stage;

• Uncontrolled exchange rates – what rate will the receiving
scheme change your money at? (4% Variance is common from the Inter-Bank
rate – 1% is what it should be)

• The cheque which is sent and not the electronic option, you
better believe it (Factor in 1% of fund value – it should be 0%)

• The avoidable tax charge caused by missing the 6 months if a
pension should be transferred – surface post, the wrongly addressed
cheque (Potential of maybe 3% loss in value)

• The not merging of benefits where appropriate pre-departure,
(increased handling costs – difficult to quantify as to the % loss but
we estimate 2%)

• The reduction of charges from the exiting scheme, (scheme by
scheme depends on when the transfer took place – no % stated due to the
variance factors)

• The managing of compensation issues pre-departure due to the
potential tax impost and the grossing up provisions, (another difficult
one to judge – but case by case examination necessary)

• The not offering to protect a fund against the exchange rate
fluctuations, (could be 15% - e.g. we had a very happy client
transferring funds at A$2.90 when rate was A$2.45 – he was not alone)
what rate do you switch your pensions at?

• The lack of knowledge of re-basing provisions, (could be 3%) –
its the pre-six month switch.

• The UK IHT issue on pensions, (40% of Value)

• Etc, etc.



These hidden costs are ones which an Australian based advisor will
invariably to shy away from – unless he or she has a UK counterpart who
is co-ordinating the pre-departure planning. Those of us who handle UK
pensions for migrants or make recommendation as to which advice route to
take should always consider the above effects,



We face complications such as the following (on the other hand
clients meanwhile face the consequences of the costs of the above by
delaying advice):



It can take months to get pensions into the right shape for departure to
minimise the above exposure to loss. Because of the six month rule the
pressure is on to get moving as it is pre-departure planning that gets
the costs down. Once you leave UK, time is against you – but a
signature can be turned round by driving to a location if you happen to
be in the UK, but if you are post departure it just adds a good week in
each direction for mail to turn around, if for example original
signatures are required – watch that six months. Hence why because of
some of the above cost issues, there may be no real option but to
recommend (in our capacity as advisors) a client to delay a departure.



It goes without saying that to action the above, reality says you need
to be UK regulated with the necessary UK based service providers and
facilities and qualifications to handle the above pre-departure with
Australian based advisors linking in who understand the above financial
planning techniques.



Geraint Davies

www.miplc.co.uk


--
Posted via http://britishexpats.com

Originally posted by gld
Thought you may be interested in some pension transfer issues - something that hits the migrants pocket.

Hidden costs in pensions can be controlled by exercising prudent planning pre-departure. The first 3 alone account for 6% of fund value for starters.

• The hidden costs of bank charges on transfer, (Factor in 2% of fund value – it should be 0%) – its incredible how much is lost at this stage;
• Uncontrolled exchange rates – what rate will the receiving scheme change your money at? (4% Variance is common from the Inter- Bank rate – 1% is what it should be)
• The cheque which is sent and not the electronic option, you better believe it (Factor in 1% of fund value – it should be 0%)
• The avoidable tax charge caused by missing the 6 months if a pension should be transferred – surface post, the wrongly addressed cheque (Potential of maybe 3% loss in value)
• The not merging of benefits where appropriate pre-departure, (increased handling costs – difficult to quantify as to the % loss but we estimate 2%)
• The reduction of charges from the exiting scheme, (scheme by scheme depends on when the transfer took place – no % stated due to the variance factors)
• The managing of compensation issues pre-departure due to the potential tax impost and the grossing up provisions, (another difficult one to judge – but case by case examination necessary)
• The not offering to protect a fund against the exchange rate fluctuations, (could be 15% - e.g. we had a very happy client transferring funds at A$2.90 when rate was A$2.45 – he was not alone) what rate do you switch your pensions at?
• The lack of knowledge of re-basing provisions, (could be 3%) – its the pre-six month switch.
• The UK IHT issue on pensions, (40% of Value)
• Etc, etc.

These hidden costs are ones which an Australian based advisor will invariably to shy away from – unless he or she has a UK counterpart who is co-ordinating the pre-departure planning. Those of us who handle UK pensions for migrants or make recommendation as to which advice route to take should always consider the above effects,

We face complications such as the following (on the other hand clients meanwhile face the consequences of the costs of the above by delaying advice):

It can take months to get pensions into the right shape for departure to minimise the above exposure to loss. Because of the six month rule the pressure is on to get moving as it is pre-departure planning that gets the costs down. Once you leave UK, time is against you – but a signature can be turned round by driving to a location if you happen to be in the UK, but if you are post departure it just adds a good week in each direction for mail to turn around, if for example original signatures are required – watch that six months. Hence why because of some of the above cost issues, there may be no real option but to recommend (in our capacity as advisors) a client to delay a departure.

It goes without saying that to action the above, reality says you need to be UK regulated with the necessary UK based service providers and facilities and qualifications to handle the above pre-departure with Australian based advisors linking in who understand the above financial planning techniques.

Geraint Davies
www.miplc.co.uk



I would have to add that detailed knowledge of Australian tax and
financial scene would be essential as well. Often a UK advisor has said
to retain the pension fund in a place that provides returns to the
financial advisor and gives the pensioner a shocking tax bill years
down the line.


--
Posted via http://britishexpats.com

Originally posted by bondipom
I would have to add that detailed knowledge of Australian tax and financial scene would be essential as well. Often a UK advisor has said to retain the pension fund in a place that provides returns to the financial advisor and gives the pensioner a shocking tax bill years down the line.



Bondipom



You are spot on.



We (3 of us from MIPLC in UK) appeared before the Australian Senate
Enquiry on Overseas Pension Transfers. We gave evidence twice - nobody
else I believe did - initially we had to fly to Melbourne. Points you
raise were key issues discussed in Melbourne.



Mis-selling was high on the agenda, e.g. Australian Financial Planners
cajoling migrants into post departure advice. It wasn't Australian
advisors alone it was UK advisors who hadn't a clue about what the
issues were. However the provision and promotion of advice by
unregulated advisors from Australia acting in the UK remains a key
reason for many unnecessary hidden costs becoming harsh reality.



Regardless of whether it was best advice to move a pension & there are
plenty of times where a transfer is not the best advice - Who looks
after those in such situations? It also appeared that some interested
third parties may even knowingly or unknowingly of the issues be
suggesting that migrants just use an Australian advisor to move their
funds without considering or realising the hard cost consequences
mentioned in my original posting.



So I believe its high time this leave till you get there approach comes
to an end.



It would be interesting to find out how the non-UK regulated Australian
advisors promote themselves as if you ain't regulated you cannot advise
& you can't set up pre-departure optimisation.



I moved back to the UK to set this pre-departure business up knowing
full well that the above that I referred to could only be handled on the
ground in the UK with pre-departure planning.

By tackling the issues pre-departure then the tax bill can be controlled
- as well as the other "cost hits" which should be high on the agenda.
The Australian based advisor who works with a regulated UK advisor can
then get the migrant into Australia relatively unscathed. Those hidden
costs are worrying and serious - so more comments are welcome.



I am still getting to grips with how to communicate on this system - so
I hope my posting is OK.



Advocates for leaving planning till arrival - may need to change
their policy.



Happy New Year





Geraint



www.miplc.co.uk


--
Posted via http://britishexpats.com

Originally posted by gld
Bondipom



Regardless of whether it was best advice to move a pension & there are plenty of times where a transfer is not the best advice - Who looks after those in such situations? It also appeared that some interested third parties may even knowingly or unknowingly of the issues be suggesting that migrants just use an Australian advisor to move their funds without considering or realising the hard cost consequences mentioned in my original posting.

www.miplc.co.uk



Geraint:



I hope I'm right in assuming that Final Salary Company pensions are
not affected?



I'm receiving one such and hope to move next year: my understanding is
that my company pension will be paid to a bank in Oz in $$ (at a cost of
£2 per month) and I will pay Oz tax on that.



Presumably the "integrated investment" in the scheme that provides the
pension can't be transferred and is not liable to Oz tax?


--
Posted via http://britishexpats.com

Originally posted by Rog Williams
Geraint:

I hope I'm right in assuming that Final Salary Company pensions are not affected?

I'm receiving one such and hope to move next year: my understanding is that my company pension will be paid to a bank in Oz in $$ (at a cost of £2 per month) and I will pay Oz tax on that.

Presumably the "integrated investment" in the scheme that provides the pension can't be transferred and is not liable to Oz tax?

Rog

I have an occupational pension paid in UK at present.My understanding
is that when I move to Australia I will receive a Tax credit under the
Double Taxation agreement and only pay tax in Australia.This is outlined
on the Australian Tax Office website:

www.ato.gov.au

G


--
Posted via http://britishexpats.com

Once you have moved to Australia you should apply for a No Tax Coding
under the UK-Australia Tax Treaty such that no tax is deducted under the
UK's PAYE system on your UK source pension.



The form to claim this treatment is here:

http://www.inlandrevenue.gov.uk/cnr/aust_indiv.pdf



As you say, a pension paid from the UK is taxable in Australia under the
terms of the Treaty.



Best wishes for the New Year.







Originally posted by Grayling
Rog
I have an occupational pension paid in UK at present.My understanding is that when I move to Australia I will receive a Tax credit under the Double Taxation agreement and only pay tax in Australia.This is outlined on the Australian Tax Office website:
www.ato.gov.au

G


--
Alan Collett of Go Matilda, http://www.gomatilda.com


Posted via http://britishexpats.com

Originally posted by gld
Thought you may be interested in some pension transfer issues - something that hits the migrants pocket.

Hidden costs in pensions can be controlled by exercising prudent planning pre-departure. The first 3 alone account for 6% of fund value for starters.

• The hidden costs of bank charges on transfer, (Factor in 2% of fund value – it should be 0%) – its incredible how much is lost at this stage;
• Uncontrolled exchange rates – what rate will the receiving scheme change your money at? (4% Variance is common from the Inter- Bank rate – 1% is what it should be)
• The cheque which is sent and not the electronic option, you better believe it (Factor in 1% of fund value – it should be 0%)
• The avoidable tax charge caused by missing the 6 months if a pension should be transferred – surface post, the wrongly addressed cheque (Potential of maybe 3% loss in value)
• The not merging of benefits where appropriate pre-departure, (increased handling costs – difficult to quantify as to the % loss but we estimate 2%)
• The reduction of charges from the exiting scheme, (scheme by scheme depends on when the transfer took place – no % stated due to the variance factors)
• The managing of compensation issues pre-departure due to the potential tax impost and the grossing up provisions, (another difficult one to judge – but case by case examination necessary)
• The not offering to protect a fund against the exchange rate fluctuations, (could be 15% - e.g. we had a very happy client transferring funds at A$2.90 when rate was A$2.45 – he was not alone) what rate do you switch your pensions at?
• The lack of knowledge of re-basing provisions, (could be 3%) – its the pre-six month switch.
• The UK IHT issue on pensions, (40% of Value)
• Etc, etc.

These hidden costs are ones which an Australian based advisor will invariably to shy away from – unless he or she has a UK counterpart who is co-ordinating the pre-departure planning. Those of us who handle UK pensions for migrants or make recommendation as to which advice route to take should always consider the above effects,

We face complications such as the following (on the other hand clients meanwhile face the consequences of the costs of the above by delaying advice):

It can take months to get pensions into the right shape for departure to minimise the above exposure to loss. Because of the six month rule the pressure is on to get moving as it is pre-departure planning that gets the costs down. Once you leave UK, time is against you – but a signature can be turned round by driving to a location if you happen to be in the UK, but if you are post departure it just adds a good week in each direction for mail to turn around, if for example original signatures are required – watch that six months. Hence why because of some of the above cost issues, there may be no real option but to recommend (in our capacity as advisors) a client to delay a departure.

It goes without saying that to action the above, reality says you need to be UK regulated with the necessary UK based service providers and facilities and qualifications to handle the above pre-departure with Australian based advisors linking in who understand the above financial planning techniques.

Geraint Davies
www.miplc.co.uk



Are you suggesting that you can reduce the first three factors to
1% or less?


--
Posted via http://britishexpats.com

Originally posted by jumbo
Are you suggesting that you can reduce the first three factors to 1% or less?



I thought it was par for the course that you looked at these pre-
departure - but its clear that people are being recommended to deal with
this post departure.



Depending on circumstances and a proper examination and stopping clients
making the wrong move - YES and other costs can be saved.



Currently there is a means of getting exchange rate losses to create a
tax refund but that is not pensions.



These costs need to be worked on pronto - if it is the right move to
transfer a pension.



Happy New Year





Geraint


--
Posted via http://britishexpats.com

Originally posted by Grayling
Rog
I have an occupational pension paid in UK at present.My understanding is that when I move to Australia I will receive a Tax credit under the Double Taxation agreement and only pay tax in Australia.This is outlined on the Australian Tax Office website:
www.ato.gov.au
G



Its taxed in Australia use the FD2, but you need to get the UPP worked
on - and you may have other pre-departure issues that need addressing.



The difficulty in self advice is that you only look for waht you are
looking for when we see clients we are looking at everything the client
has got from all directions - leaving no stone unturned - with pre-
deparyure optimisation.



You will not get taxed on the body of the pension just what comes out -
there may be other things you have missed- give us a call and we will
talk it over the phone.



Have a look at www.miplc.co.uk



Happy New Year







Geraint


--
Posted via http://britishexpats.com

Originally posted by gld
Its taxed in Australia use the FD2, but you need to get the UPP worked on - and you may have other pre-departure issues that need addressing.

The difficulty in self advice is that you only look for waht you are looking for when we see clients we are looking at everything the client has got from all directions - leaving no stone unturned - with pre-deparyure optimisation.

You will not get taxed on the body of the pension just what comes out - there may be other things you have missed- give us a call and we will talk it over the phone.

Have a look at www.miplc.co.uk

Happy New Ye

Geraint





I did talk to you a couple of years ago in your office in Surrey

G


--
Posted via http://britishexpats.com

And the financial planner's fees of course ... :-))



As a guide, how much do you and the financial planners who you work with
in Australia charge as a % of the pension fund transferred Geraint?



Best regards.







Originally posted by gld
Thought you may be interested in some pension transfer issues - something that hits the migrants pocket.

Hidden costs in pensions can be controlled by exercising prudent planning pre-departure. The first 3 alone account for 6% of fund value for starters.

• The hidden costs of bank charges on transfer, (Factor in 2% of fund value – it should be 0%) – its incredible how much is lost at this stage;
• Uncontrolled exchange rates – what rate will the receiving scheme change your money at? (4% Variance is common from the Inter- Bank rate – 1% is what it should be)
• The cheque which is sent and not the electronic option, you better believe it (Factor in 1% of fund value – it should be 0%)
• The avoidable tax charge caused by missing the 6 months if a pension should be transferred – surface post, the wrongly addressed cheque (Potential of maybe 3% loss in value)
• The not merging of benefits where appropriate pre-departure, (increased handling costs – difficult to quantify as to the % loss but we estimate 2%)
• The reduction of charges from the exiting scheme, (scheme by scheme depends on when the transfer took place – no % stated due to the variance factors)
• The managing of compensation issues pre-departure due to the potential tax impost and the grossing up provisions, (another difficult one to judge – but case by case examination necessary)
• The not offering to protect a fund against the exchange rate fluctuations, (could be 15% - e.g. we had a very happy client transferring funds at A$2.90 when rate was A$2.45 – he was not alone) what rate do you switch your pensions at?
• The lack of knowledge of re-basing provisions, (could be 3%) – its the pre-six month switch.
• The UK IHT issue on pensions, (40% of Value)
• Etc, etc.

These hidden costs are ones which an Australian based advisor will invariably to shy away from – unless he or she has a UK counterpart who is co-ordinating the pre-departure planning. Those of us who handle UK pensions for migrants or make recommendation as to which advice route to take should always consider the above effects,

We face complications such as the following (on the other hand clients meanwhile face the consequences of the costs of the above by delaying advice):

It can take months to get pensions into the right shape for departure to minimise the above exposure to loss. Because of the six month rule the pressure is on to get moving as it is pre-departure planning that gets the costs down. Once you leave UK, time is against you – but a signature can be turned round by driving to a location if you happen to be in the UK, but if you are post departure it just adds a good week in each direction for mail to turn around, if for example original signatures are required – watch that six months. Hence why because of some of the above cost issues, there may be no real option but to recommend (in our capacity as advisors) a client to delay a departure.

It goes without saying that to action the above, reality says you need to be UK regulated with the necessary UK based service providers and facilities and qualifications to handle the above pre-departure with Australian based advisors linking in who understand the above financial planning techniques.

Geraint Davies

www.miplc.co.uk


--
Alan Collett of Go Matilda, http://www.gomatilda.com


Posted via http://britishexpats.com

For those who aren't clear the UPP = the Undeducted Purchase Price =
a possible tax deduction for offset against the income deriving from
the pension.



Best regards.







Originally posted by gld
Its taxed in Australia use the FD2, but you need to get the UPP worked on - and you may have other pre-departure issues that need addressing.

The difficulty in self advice is that you only look for waht you are looking for when we see clients we are looking at everything the client has got from all directions - leaving no stone unturned - with pre-deparyure optimisation.

You will not get taxed on the body of the pension just what comes out - there may be other things you have missed- give us a call and we will talk it over the phone.

Have a look at www.miplc.co.uk

Happy New Year




Geraint


--
Alan Collett of Go Matilda, http://www.gomatilda.com


Posted via http://britishexpats.com

Originally posted by Alan Collett
And the financial planner's fees of course ... :-))

As a guide, how much do you and the financial planners who you work with in Australia charge as a % of the pension fund transferred Geraint?

Best regards.



Pension transfer direct charge 5% of the fund plus $660 - a rip off!


--
Posted via http://britishexpats.com

Jumbo



You could be right, but glad you brought this up. A$660 (regardless of
the number of funds) + 5% is in my opinion a “Best of One World" option
- this could well lead to triggering that hidden cost impact I
previously referred to. Unless you are authorised in the UK, you can't
embark upon a course of hidden cost minimisation.



I recommend look at what is in your best interests. Don’t guess it
though. What if the funds should not be moved? A$660 cannot possibly
cover the cost of advice for one pension let alone if you have 5
pensions. And because of the complexity of pensions - advisors are
instructed to exercise extreme care if a client insists on a transaction
without advice, i.e. on the advisors head be it, if at a later date the
client makes a complaint & evidence only suggests that the client was
not sufficiently informed to instruct the advisor what to do.



Guidance Notes on pension transfers exist and because of hidden cost
minimisation these are very relevant. These regulator issued directives
clearly spell out a message and that is advisors they must do research
before giving advice. They also spell out who can give advice on
pension transfers – they are officially known as Pension Transfer
Specialists. We are such an animal and in my opinion so should anybody
else giving advice on pensions - i.e. authorised. How else do you do
hidden cost minimisation? i.e. move a fund into an alternative UK one -
it needs that mover to be registered.



Incidentally Pension Transfers Direct do not appear to be on the
Financial Services Authority website - let alone recorded as pension
transfer specialists. It may be interesting to see which other firms
are registered – who get recommended in this forum. Therefore….



What if a fund should never be moved? What if it should be moved
eventually? What if immediately?



Those of us who abide by the Guidance Notes must take as the starting
point of advice - that it is best not to move a pension benefit, i.e.
same principles as don't break it unless it is broken, innocent until
proven guilty.



If the advice is not to transfer - and the research can confirm as such
then the 5% is irrelevant - but the time taken to confirm that position
should still be paid for in my opinion. Nobody who works for a client
should do it for free - clients don't work for free. I can't help but
think that a charging structure which is so heavily % based does require
a certain need to transact a transfer for that firm to exist..



If judgement is purely based upon a % of funds transferred then if its
5% - and the fund is £1,000,000 or the fund is £10,000 something is
wrong because time is not being factored in. If the work takes 20 hours
and that is all. then 5% of £10,000 is £500 - i.e. £25 per hour -
that's not fair for the work done but if its £50,000 for 20 hours than
that is obscene.



We once had a £40,000 case so complicated that 240 hours were involved.
(Mis-selling issues). Price is based upon what work is involved.



Depending on your circumstances you may actually have a good deal at the
price quoted - you can't tell until you know what the job is - that is
why we never price any work until we have conducted an initial
consultation. We don't guess. Clearly there could be other advice
demands i.e. CGT issues, endowment compensation issues, re-mortgages,
stop-gap life cover, the IHT overhang, the tax year, the visa
interaction, - it just goes on and on..



To cash flow this advice - brokerage received can certainly alleviate
the cost of advice - if a product purchase which pays commission is
required. You of course could choose to pay on a time basis.



You can of course lose more by not getting advice, there are those
hidden cost issues, paying too little and starting the process of advice
too late, could work against you.



Suffice it to say our work is based on pre-departure planning and the
time it takes. And how we work it is that if a fund should be
transferred we get the Australian Advisor to subsidise client fees to
varying degrees by adjusting brokerage to avoid the client being double-
charged and by our partial recouping fees by controlling the advisor as
to how much he will charge - i.e. we get the Australian Advisor to
contribute towards client fees.



Hope this helps





Geraint



www.miplc.co.uk



Originally posted by jumbo

Pension transfer direct charge 5% of the fund plus $660 - a rip
off!


--
Posted via http://britishexpats.com

Originally posted by Alan Collett
And the financial planner's fees of course ... :-))

As a guide, how much do you and the financial planners who you work with in Australia charge as a % of the pension fund transferred Geraint?

Best regards.



Alan



Your focus on percentage paid is an interesting one, because I am sorry
to say your question simply does not apply to us. We are a fee based
firm and have been so for some time now, we focus on managing the client
within an advice process.



Indeed we seem to be not only the only firm in the “Pension Advice for
Migrants Business” who “transfer pensions to Australia” but the only one
who is authorised – the others seem to just “transfer pensions to
Australia” without the authorisation necessary to deal with hidden
costs. We are authorised proud of it and not a transaction based firm
working on a fixed percentage. Let me explain how we operate.



We work very differently to those who offer a Best of One World
approach. Your question pre-supposes for comparison purposes that the
person giving advice is authorised in the UK – a key factor in the
hidden cost discussion. Also from the perspective that if you are
regulated you have the additional costs of regulation to cover. We are
of course regulated by the FSA and are recorded as such as Pension
Transfer Specialists. However I must directly address your question.



I presume you are familiar with the concept of charging by time?
Pricing work by the time it will take, is our means of earning a crust.
That is how clients pay us – the more time which is needed(a factor of
quantum and complexity) the greater the fee, the less time the less the
fee – but it’s not just as simple as that because we allow credits for
fees. Everything remains however based on time.



We moved away from percentages some time ago because it smacked of Best
of One World and I was not comfortable with this. So we work out how
much time it will take and we then end up after taking off any potential
brokerage - the engagement fee. But we provide within the engagement
fee – other work such as checking notes, working on mis-sales, pension
hidden cost minimisation, tax planning, IHT work, endowment mis-selling
reviews, it just goes on. That may explain why I wonder how these
unregulated firms charge or perhaps what do they do?– are they just
flogging best of one world we transfer pensions who shy away from
looking at the other issues besides the hidden costs by trying to do
business on a percentage basis?



Authorised or Unauthorised if judgement is purely based upon a % of
funds transferred then if its 2%- and the fund is £1,000,000 or the fund
is £10,000 something is wrong because time is not being factored in. If
the work takes 20 hours and that is all then 2% of £10,000 is £200 -
i.e. £10 per hour - that's not fair for the work done but if its £20,000
for 20 hours than that is also wrong.



We once had a £40,000 case so complicated that 240 hours were involved.
(Mis-selling issues). Price is based upon what work is involved.



To cash flow this advice - brokerage received by an Australian advisor
or MIPLC for that matter can certainly alleviate the cost of advice -
providing a product purchase which pays commission is required. You of
course could choose to pay on a time basis.



You can of course lose more by not getting advice, there are those
hidden cost issues, paying too little and starting the process of advice
too late, can in a very expnsive way work against you. Perhaps the real
focus should be on the advice and the quality of it and the
implementation work and how hidden costs can be minimised.



Suffice it to say our work is based on pre-departure planning and
the time it takes. And how we work it is that if a fund should be
transferred we get the Australian Advisor to subsidise client fees
to varying degrees by adjusting brokerage to avoid the client being
double-charged and by our partial recouping fees by controlling the
advisor as to how much he will charge - i.e. we get the Australian
Advisor to contribute from any brokerage they receive to reduce our
engagement fees.



Hope this helps





Geraint



www.miplc.co.uk


--
Posted via http://britishexpats.com

Originally posted by Rog Williams
Geraint:

I hope I'm right in assuming that Final Salary Company pensions are not affected?

I'm receiving one such and hope to move next year: my understanding is that my company pension will be paid to a bank in Oz in $$ (at a cost of £2 per month) and I will pay Oz tax on that.

Presumably the "integrated investment" in the scheme that provides the pension can't be transferred and is not liable to Oz tax?



Rog



Not sure whether I covered these issues or not with you - but there are
other options to moving the funds in one go - i.e. holding them in UK
lonegr - the exchange rate may not be favourable.



Geraint


--
Posted via http://britishexpats.com

Originally posted by gld
Rog

Not sure whether I covered these issues or not with you - but there are other options to moving the funds in one go - i.e. holding them in UK lonegr - the exchange rate may not be favourable.

Geraint



I'm not sure that I follow you: my pension is paid from a company
scheme, and I don't HAVE any funds actually in the scheme in the way
that a personal pension does.



My question referred to whether the ATO has any interest in the
underlying pension fund investments. These are in the billions- I hate
to think of the tax if exchange rate fluctuations are taxed!


--
Posted via http://britishexpats.com

Originally posted by Rog Williams
I'm not sure that I follow you: my pension is paid from a company scheme, and I don't HAVE any funds actually in the scheme in the way that a personal pension does.

My question referred to whether the ATO has any interest in the underlying pension fund investments. These are in the billions- I hate to think of the tax if exchange rate fluctuations are taxed!



Bob



You appear safe on the pension issue. But the UPP - Undeducted
Purchase Price can be made to work - its a means of calculating what the
non-tax component is of a pension payment.



I am always wary though of misinterpretation - because there could be
other issues. So this is purely a response to that pension question.



There is now a complication on cash - well there has been for a while -
and that is cash being assessed for tax and the new changes.



Hope this clears up the issue.



Because of the way we are regulated we have to follow compliance rules.
Therefore please make contact for absolute clarification. This is not
advertising just compliance procedures.



My compliance person is back on Monday so I trust this is not seen as
advertising - put purely those who are licensed how we are regulated.



Kind Regards







Geraint



www.miplc.co,uk


--
Posted via http://britishexpats.com

Originally posted by gld
Thought you may be interested in some pension transfer issues - something that hits the migrants pocket.

Hidden costs in pensions can be controlled by exercising prudent planning pre-departure. The first 3 alone account for 6% of fund value for starters.

• The hidden costs of bank charges on transfer, (Factor in 2% of fund value – it should be 0%) – its incredible how much is lost at this stage;
• Uncontrolled exchange rates – what rate will the receiving scheme change your money at? (4% Variance is common from the Inter- Bank rate – 1% is what it should be)
• The cheque which is sent and not the electronic option, you better believe it (Factor in 1% of fund value – it should be 0%)
• The avoidable tax charge caused by missing the 6 months if a pension should be transferred – surface post, the wrongly addressed cheque (Potential of maybe 3% loss in value)
• The not merging of benefits where appropriate pre-departure, (increased handling costs – difficult to quantify as to the % loss but we estimate 2%)
• The reduction of charges from the exiting scheme, (scheme by scheme depends on when the transfer took place – no % stated due to the variance factors)
• The managing of compensation issues pre-departure due to the potential tax impost and the grossing up provisions, (another difficult one to judge – but case by case examination necessary)
• The not offering to protect a fund against the exchange rate fluctuations, (could be 15% - e.g. we had a very happy client transferring funds at A$2.90 when rate was A$2.45 – he was not alone) what rate do you switch your pensions at?
• The lack of knowledge of re-basing provisions, (could be 3%) – its the pre-six month switch.
• The UK IHT issue on pensions, (40% of Value)
• Etc, etc.

These hidden costs are ones which an Australian based advisor will invariably to shy away from – unless he or she has a UK counterpart who is co-ordinating the pre-departure planning. Those of us who handle UK pensions for migrants or make recommendation as to which advice route to take should always consider the above effects,

We face complications such as the following (on the other hand clients meanwhile face the consequences of the costs of the above by delaying advice):

It can take months to get pensions into the right shape for departure to minimise the above exposure to loss. Because of the six month rule the pressure is on to get moving as it is pre-departure planning that gets the costs down. Once you leave UK, time is against you – but a signature can be turned round by driving to a location if you happen to be in the UK, but if you are post departure it just adds a good week in each direction for mail to turn around, if for example original signatures are required – watch that six months. Hence why because of some of the above cost issues, there may be no real option but to recommend (in our capacity as advisors) a client to delay a departure.

It goes without saying that to action the above, reality says you need to be UK regulated with the necessary UK based service providers and facilities and qualifications to handle the above pre-departure with Australian based advisors linking in who understand the above financial planning techniques.

Geraint Davies
www.miplc.co.uk



I cannot accept all your alarmist figures obviously to scare people into
consulting you.

Why does it cost 1% fund value to write a cheque? UK cheques are
usually cashed in Oz with a small fixed charge.



If you can transfer a pension at $2.90 when the exchange rate is $2.45
you must tell the rest of us how.


--
Posted via http://britishexpats.com

Originally posted by Nogo
I cannot accept all your alarmist figures obviously to scare people into consulting you.
Why does it cost 1% fund value to write a cheque? UK cheques are usually cashed in Oz with a small fixed charge.

If you can transfer a pension at $2.90 when the exchange rate is $2.45 you must tell the rest of us how.



Nogo



If you have a pension fund which issues a cheque for an overseas
transfer then - it can take a week to get from the day the cheque issued
to the day it arrives in Australia (having been involved in over a
thousand transfers - we speak from experience) - believe it or not the
cheque goes back to the UK for clearing - that often takes 6 weeks -
then it has to be processed and invested. That is 1/7 of a year, so
monies are invested often 7 weeks after they should have been - who
loses on investment performance? - you do. What is 1/7 of 8%. The art
is to get the pension scheme to issue an Electronic Bank Transfer - that
is easier said than done, we get the pensions organised in such a way
that it is EBT



On the second question its making a UK fund which A$ denominated -
allowing the funds to be switched in A$ - we do this all the time, you
choose the date. Admittedly the rate is no longer A$2.90 - but when you
started the process what was the rate? Could you have by taking early
advice have a pension in A$ at A$2.60 say. But it takes on average 3
months to get benefits into shape to grab the rate at a drop of a hat -
if you were to see A$2.50 would you grab part of your fund at that rate?
If so then you have to re-structure the funds in order to grab the rate.



My answer pre-supposes your funds should be transferred.



I am sorry you think that these are alarmist - they are not meant to
scare but express what are the hidden costs - I trust that fully
explains why far from being alarmist these are real issues.



Kind Regards





Geraint



www.miplc.co.uk


--
Posted via http://britishexpats.com

It can take months to get pensions into the right shape for departure to minimise the above exposure to loss. Because of the six month rule the pressure is on to get moving as it is pre-departure planning that gets the costs down..

Geraint Davies
www.miplc.co.uk





Excuss my ignorance but what is the "6 month rule"


--
Posted via http://britishexpats.com

Originally posted by keel
Excuss my ignorance but what is the "6 month rule"



Keel



Before answering this please understand that this is not to be read as
advice but background information - there is a subtle yet crucial
difference. I have to make this statement as we are registered pension
specialists with the FSA and giving advice on pensions is a regulated
activity. We do understand the interaction of the two countries and
where the nooks and crannies are to optimise your position. We
recommend not making any alteration to your pension or financial
position without advice and qualified advice at that. There are many
ways of handling this issue and its case by case dependent. The hidden
cost of pension transfers was where this thread started, i.e. cost
minimisation and fund optimisation, but now the 6 months.



This is very much a synopsis of the situation and explains "briefly" the
logic of Australian tax and the 6 months. Background first and its not
the 6 months but Social Security to unlock the understanding of this 6
month tax concession.



Australia essentially bases its Age or State Pension Benefits on a
residency test - UK has the number of years of payment of National
Insurance as its basis of age pensions. Difference Number 1, many more
now follow.



Australia then means tests ("The Test") its age & disability pensions (a
sort of Inheritance Tax on the living but its not a tax its a clawback
of pension - Australia by the way has no Inheritance Tax). Hence the
logic in Australia that all assets and income wherever they are located
in the world must be caught under The Test. So if pensions are based on
worldwide income and assets - so does Australian tax operate on similar
basis - and often in some totally unexpected and peculiar ways. And it
ain't just pensions, its a host of other matters which can lead to
advantages as well as disadvantages.



In fact you could become a pensioner the day "you walk" into Australia
if you became disabled- as pensions are paid based on a residency test.
This explains why aged parents and retirees could not get a permanent
visa without being either permanently denied or waiting until they were
well and truly "aged". Because once permanent you become eligible for
the Australian Pension System, subject to the various residency test
criteria being met. I wonder why Australia introduced the Contributory
Parent Visa - could it be to shorten the queue and get some money in?
Those who can afford to pay for this visa would in all likelihood not
get an age pension anyway because of the means test - crafty! Good deal
for Australia!



Australians have been used to The Test in various guises since the
1890's - pre Federation. NSW had a testing process in 1900. The Test
is therefore in the genes of Australians so to speak. At Federation the
Test came into the constitution but it was the Invalid and Old Age
Pensions Act of 1908 that really brought the system together - and
Commonwealth pensions from that point forward would be based upon the
Age, Residency, Means, Character and Race.



The character and race provisions – denied pensions to those not of
“good character” as well as Aliens, non-Australian born Asians,
Aborigines (Australian), Africans. Pacific Islanders and New Zealand
Maoris. This aspect of the 1908 Act took a further 60 years to
progressively remove. Now it’s got down to the residency test.



But in that you see the makings of even the migration laws, the
retirement laws and the interaction of tax and financial planning and
one countries rules with Australia. The Australian retirement system
and policy is poles apart from the UK or most countries for that matter.
The country you are heading for and retirement in time I presume? Now
for the origins of the tax issue.



Since 1915 Australians have been paying tax on their lump superannuation
(somewhat equivalent to the UK Retirement Annuity, Personal Pension and
Occupational Pension System). It was the Australian Governments May
Economic Statement of 1983 that really started the tax tinkering which
would affect migrants. Australia was on the road of change and tax
featured heavily. Progressively the tax burden was to shift to pre-
retirement with a lesser burden post-retirement. (UK is the virtual
opposite). What with the now linking of The Test and tax so did
financial planning opportunities arise to get a better deal. This is
espcially as a great deal of potential flexibility exists of how to take
benefits, Australians in their own right are therefore through this
conditioning very, very astute financial planners - they have to be.
Migrants are not used to this level of financial planning exposure.
You will need to know how it works though, because you will be affected
by this system - there is no opt out clause.



I mention the tax tinkering - it came in the form of Australians being
able to avail themselves of a complex system of planning which when
dovetailed with the UK pension system lead to many opportunities, one of
which was extracting a pension asset from UK and placing it into an
Australia Superannuation. But why even consider moving one? And why
might move one and leave another?



You see if Australians are tax assessed on their retirement schemes and
are means tested - why should not those who migrate be subject to the
same set of conditions as Australians, whose parents, grandparent, great
grand-parents have been subject to for decades and who now in turn are
also? There is of course no reason.



So under a quirk of legislation it is possible to move a pension fund to
Australia and turn it into an Australian Superannuation Scheme - if the
transfer is completed within 6 months then there is no tax. And other
benefits could ensue, there are many issues to consider, because there
are exemptions and catches.



Look at the Senate Select Committee on Superannuation Reference
"Taxation Treatment of Transfers from Overseas Superannuation Funds"
Friday 17 May 2002 and Darren McCormack - Compliance Manager - UniSuper
- who talks of the actual time it takes one of Australias largest funds
to move a UK fund.



If a fund is moved within 6 months there should be no tax, (not always
the case). In that short sentence is a summary of the end and the
beginning of this issue as not all pensions should be moved. Whilst
others should be moved in time, others need optimising pre-transfer to
Australia. There are a number of issues which need to be considered.



I am in my professional capacity under no circumstances suggesting that
you move a pension fund overseas it depends on so many factors. However
if a statement is made under oath in the Senate Enquiry that 18 months
can be par for the course - do all you can to reduce the tax and the
costs burden by planning properly - by getting advice as to whether your
pension is one that should move or not. As to the tax...



A person whose pension should have moved which went from an effective
A$100K to A$106K in 6 months + 1 day would if a higher rate tax payer
find themselves having to find almost 50% of the A$6K in tax, from their
own pocket.



And before anybody else chirps in - we know the rules are under review -
so what said above is as of today. We are as a firm aware of the
proposed changes, and following a request from the Australian Treasury
we are currently submitting an Opinion of the proposed changes with
recommendations. Why the request? Probably because history shows we
justifiably lay claim to have played a pivotal role in pioneering the
process of advice and transfer procedures in this area.



By re-arranging finances one can get a substantially larger state
pension and other ancillary benefits - (when I practised in Australia,
re-structuring was an everyday focus for myself).



What is not generally realised though is that it is also possible pre-UK
departure or any other country for that matter to get a better 6 month
arrival deal for Australia. This is done by re-arranging finances which
incidentally lead to removal of many hidden costs. When you retire -
hopefully graciously and not due to disability then this optimisation
should come to the fore.



But its not just Age Pensions, its taxable income, its financial
security, etc. etc., that is affected.



The key for migrants is to always focus on the fours pillars - tax,
social security, financial product planning and timing - pre and
post departure



Hope this helps



Kind Regards





Geraint


--
Posted via http://britishexpats.com

Cheers Geraint



Thankyou for taking the time to answer my short question. As with most
people I dont understand any thing about my pension and I'm even more
confused now I think I'll just leave it in the UK for now.



Keel


--
Posted via http://britishexpats.com

Originally posted by keel
Cheers Geraint

Thankyou for taking the time to answer my short question. As with most people I dont understand any thing about my pension and I'm even more confused now I think I'll just leave it in the UK for now.

Keel



Keel



Thanks for your response - you have hit upon the problem, its
complicated. If you want to give me a call I will explain.



Kind Regards







Geraint


--
Posted via http://britishexpats.com

- I have read this thread with my accountancy head on and have to say
that Geraint you talk the most utter drivel and self serving nonsense
I have seen.



You are using scare tactics, unnesacarrily complicating issues and

doing so in an arraogant and high handed manner.



Is this so that you can get some more business?



I have examined Pension Transfers direct and a couple of Aus based
people in your line and will be placing my business with them -
after being driven to this by your nonsense posts and the blatant
rubbish you talk.



I have canvassed the registered migration agents whom I investigated to
use for my own case and find not one of the UK based people would
recomend you and a significant number would actively discourage me from
approaching you- after previous experiences with you and your firm.



As commented on earlier I have a copy of one of your reports from one of
my clients and - ... you should stick to flogging insurance mate.


--
Posted via http://britishexpats.com

Originally posted by gld
Thought you may be interested in some pension transfer issues - something that hits the migrants pocket.

Hidden costs in pensions can be controlled by exercising prudent planning pre-departure. The first 3 alone account for 6% of fund value for starters.

• The hidden costs of bank charges on transfer, (Factor in 2% of fund value – it should be 0%) – its incredible how much is lost at this stage;
• Uncontrolled exchange rates – what rate will the receiving scheme change your money at? (4% Variance is common from the Inter- Bank rate – 1% is what it should be)
• The cheque which is sent and not the electronic option, you better believe it (Factor in 1% of fund value – it should be 0%)
• The avoidable tax charge caused by missing the 6 months if a pension should be transferred – surface post, the wrongly addressed cheque (Potential of maybe 3% loss in value)
• The not merging of benefits where appropriate pre-departure, (increased handling costs – difficult to quantify as to the % loss but we estimate 2%)
• The reduction of charges from the exiting scheme, (scheme by scheme depends on when the transfer took place – no % stated due to the variance factors)
• The managing of compensation issues pre-departure due to the potential tax impost and the grossing up provisions, (another difficult one to judge – but case by case examination necessary)
• The not offering to protect a fund against the exchange rate fluctuations, (could be 15% - e.g. we had a very happy client transferring funds at A$2.90 when rate was A$2.45 – he was not alone) what rate do you switch your pensions at?
• The lack of knowledge of re-basing provisions, (could be 3%) – its the pre-six month switch.
• The UK IHT issue on pensions, (40% of Value)
• Etc, etc.

These hidden costs are ones which an Australian based advisor will invariably to shy away from – unless he or she has a UK counterpart who is co-ordinating the pre-departure planning. Those of us who handle UK pensions for migrants or make recommendation as to which advice route to take should always consider the above effects,

We face complications such as the following (on the other hand clients meanwhile face the consequences of the costs of the above by delaying advice):

It can take months to get pensions into the right shape for departure to minimise the above exposure to loss. Because of the six month rule the pressure is on to get moving as it is pre-departure planning that gets the costs down. Once you leave UK, time is against you – but a signature can be turned round by driving to a location if you happen to be in the UK, but if you are post departure it just adds a good week in each direction for mail to turn around, if for example original signatures are required – watch that six months. Hence why because of some of the above cost issues, there may be no real option but to recommend (in our capacity as advisors) a client to delay a departure.

It goes without saying that to action the above, reality says you need to be UK regulated with the necessary UK based service providers and facilities and qualifications to handle the above pre-departure with Australian based advisors linking in who understand the above financial planning techniques.

Geraint Davies
www.miplc.co.uk



Geraint



Your company is obviously well experienced in transferring UK pensions
to Australia. I am thinking about doing this but have a few concerns
about possibilities and the result.



While transfers are possible for Personal Pensions is it also possible
to transfer Retirement Annuities and Protected Rights?



I read in the Senate submission of May 2002 of which you will be
familiar that the benefits from a personal pension must be taken as a
non-commutable pension for life. My understanding was that a UK
pension transfer could be withdrawn from a Super fund tax free – but
apparently not?



What is the current actual position please?



I Refer to Mr Stevens response from the Senate Super enquiry which I quote:-



Mr Stevens—"To my mind, the biggest problem at the UK end is that if you
have your money in a personal pension plan, which is essentially the
equivalent of what we would call either a master trust or a retail type
fund—in other words, not a fund which is operated by the employer—then
you can arrange transfer of those benefits in theory, but the Australian
fund has to undertake to pay any benefit arising from that transfer and
at least 75 per cent of it in the form of a non-commutable, lifetime
pension. The first problem we have is that, apart from perhaps a couple
of government funds, I do not know of any fund in Australia which will
accept money on those terms. Therefore, transfer is not generally
possible. It seemed to be a condition that the UK used to require
virtually all benefits that came to Australian funds to be paid in
pension form. They eventually dropped that, taking an attitude of,
‘Well, if that’s the way you do it in Australia then so be it,’ but for
some reason it has been retained for funds other than those operated by
employers. – that is personal pensions."



So this raises doubts for me about treatment of transferred UK pensions.



Look forward to your response.


--
Posted via http://britishexpats.com

Originally posted by tweed
Geraint

Your company is obviously well experienced in transferring UK pensions to Australia. I am thinking about doing this but have a few concerns about possibilities and the result.

While transfers are possible for Personal Pensions is it also possible to transfer Retirement Annuities and Protected Rights?

I read in the Senate submission of May 2002 of which you will be familiar that the benefits from a personal pension must be taken as a non-commutable pension for life. My understanding was that a UK pension transfer could be withdrawn from a Super fund tax free – but apparently not?

What is the current actual position please?

I Refer to Mr Stevens response from the Senate Super enquiry which I quote:-

Mr Stevens—"To my mind, the biggest problem at the UK end is that if you have your money in a personal pension plan, which is essentially the equivalent of what we would call either a master trust or a retail type fund—in other words, not a fund which is operated by the employer—then you can arrange transfer of those benefits in theory, but the Australian fund has to undertake to pay any benefit arising from that transfer and at least 75 per cent of it in the form of a non- commutable, lifetime pension. The first problem we have is that, apart from perhaps a couple of government funds, I do not know of any fund in Australia which will accept money on those terms. Therefore, transfer is not generally possible. It seemed to be a condition that the UK used to require virtually all benefits that came to Australian funds to be paid in pension form. They eventually dropped that, taking an attitude of, ‘Well, if that’s the way you do it in Australia then so be it,’ but for some reason it has been retained for funds other than those operated by employers. – that is personal pensions."

So this raises doubts for me about treatment of transferred UK pensions.

Look forward to your response.



Yep, we are experienced in it - we pioneered a number of the procedures
(that is not an advert) - but we also do not think all schemes should go
- advice is necessary pre-departure. In fact providing basic training
to many Australian advisors, firms, etc.



The schemes you refer to can be transferred.



Have answered the lump sum issue in a previous thread just a moment ago.



Stevens was wrong - because I was designed products that would work for
Australian Super providers back in 1992 when FIF came out.



If you need more a private email maybe?



Cheers


--
Posted via http://britishexpats.com