State of the European Union - enough to make you cry!

Spain's unemployment hit a new record of 27.2% (over 6 million unemployed) with the unemployment rate for the under 25 a staggering 57%. France followed suit with a new record unemployment rate of 10.2% (over 3.2 million unemployed). Even though the UK managed to avoid a triple dip recession with a modest growth in GDP in 1Q2013 of 0.3%, as Ed Balls descries it, the UK economy is essentially flat lining with no new job growth. Inflation figures are massaged by all the EU nations. The citizens of the Eurozone have to sponsor the banks without knowing whether there will ever be return on investment, not to mention return of investment. It’s become increasingly hard to conclude whether the mainstream media is bringing us ‘independent news’.Child hunger in Greece is exploding. Some families are trying to survive on pasta and ketchup. People in Cyprus are being robbed of their savings. Even the Cypriot children who became orphans after their parents died in the 2005 plane crash and who have been paid damages, ensuring them a security for their future and education, have been confiscated a very large portion of their money with the closure of Laiki. Former customers of Irish IBRC (former Anglo Irish) have been informed that their retirement savings had no cover.

Pensions schemes and retirement funds are excluded from the deposit guarantee scheme. Goodbye retirement savings ! And you want us to have confidence in you ? No one is sure whether contributions towards pensions are secure. Those of us who have a job, will need to work until they have the two feet in the grave. - Poverty rates are soaring and the middle-class is disappearing. - The financial sector is moving away from Europe to Dubai, Hong Kong, SingaporeTo add to this gloom, German Chancellor Angela Merkel said on Monday that euro zone members must be prepared to cede control over certain policy domains to European institutions if the bloc is truly to overcome its debt crisis and win back foreign investors. Where have we seen this scenario before? Way back in the 1930s during the great depression ofcourse. History is repeating itself  and we are perhaps a few meals away from a social revolution (see video).

Retreat of Austerity from Europe may bring more opportunities for British expats working in Europe

For the last three years or more, Austerity has been the mantra in Europe blindly adopted by the governments of almost all the EU 27 nations. This policy has prolonged recession in Europe and especially in the UK which is showing signs of going through a triple dip recession. As the video shows, the calculations behind the Austerity programs are now more suspect and may be the result of something as mundane as an excel coding error. Gavin Hewitt, European editor of the BBC writes today that the austerity believers are in retreat since Europe's leaders and officials fear more now is unemployment, recession, and growing disillusionment with the eurozone that seems unable to deliver. Reducing debt is no longer the priority. This turning point is probably the beginning of the creation of a great jobs boom by next year as Governments ease on austerity and target unemployment. British expats, already well placed in Europe will now see their horizons open up as more job opportunities start to appear. Time to revisit plans for setting up a QROPS or QNUPS or an offshore bond.

Detailed comparison between QNUPS and an offshore bond

Yesterday's post on QROPS vs. QNUPS vs. offshore bond generated huge amount of interest especially asking about the differences between QNUPS and an offshore bond. I have created a table below detailing the differences from information gathered from international adviser magazine.

	Offshore Bond	QNUPS
Legal structure	Insurance policy - but normally used in conjunction with a Discretionary Trust for IHT planning	Discretionary Pension Trust
Contribution limits	Gifts into a Discretionary Trust for IHT purposes are limited to the nil rate band every 7 years i.e. £325k	HMRC do not define any limits. HMRC may challenge any contribution made to a QNUPS where it considers that they are made for the purpose of avoiding IHT, rather than funding for pension provision. Where the individual's standard of living is unaffected by the contributions, this provides evidence that IHT avoidance is not the purpose.
IHT planning	The settler must survive 7 years for the "gift" to be fully IHT efficient	Any permitted contributions or transfers are outside of the member’s estate immediately
Tax relief	No tax relief on premiums made in respect of UK residents	Any permitted contributions or transfers are outside of the member’s estate immediately
Permitted investments	Subject to the fund list of the chosen bond provider	Subject to the investment list of the QNUPS provider but can include access to Platforms, DFM portfolios, directly quoted equities, commercial/residential property
Fund taxation	Gross roll up	Gross roll up
Withdrawals	5% per annum - tax deferred	Subject to local pension rules - normally 30% TFC and similar income limits to UK drawdown
Change of provider	Unable to transfer bonds from one provider to another without incurring a chargeable event	Free to change from one provider to another subject to any asset transfer charges if applicable
Adviser fees	Post RDR come out of the 5% annual withdrawal allowance	Can be taken from the fund in addition to any other pension income payments
Fund payable on death	100% of the fund value at the date of death (Provided a Discretionary Trust was used and the settler survives the 7 years)	100% of the fund value at the date of death paid to beneficiaries - no "insurable interest" issues
Member HMRC reporting	Chargeable events reportable on self assessment return	Any pension income taken is reportable under the foreign pension income section and as such 90% will be subject to tax at the member's marginal rate
Regulation	By the Financial Conduct Authority	Depends on the local regulator e.g. In Gibraltar the Trustee is regulated by the Gibraltar Financial Services Commission
Compensation scheme	Covered by the FSCS	Subject to any local compensation scheme - normally none. However, as QNUPS are normally Trust based the investments are protected within the Trust themselves

New EU rules to double cost of British Pensions - Time to head for safer shores?

The Telegraph has a great article today on how new EU rules are set to double the cost of pensions to British companies. According to the article, the EU body that regulates occupational pensions estimated that the deficit in the UK’s defined benefit pension schemes would be£450bn if the new rules, called “Solvency II”, were introduced. The deficit currently stands at £237bn, according to figures released on Tuesday by Britain’s Pension Protection Fund. The National Association of Pension Funds (NAPF) has also warned that moving to the new rules for pensions would put a “huge burden” on Britain’s remaining final salary pension schemes and the businesses that run them undermining the retirement plans of millions of people both in the UK and across Europe. As I keep harping time and again, it is well worthwhile to consider moving your pension to a safe offshore location such as the Isle of Man or the Channel Islands taking advantage of HRM's QROPS provison and escape EU bureaucracy and costs on your pensions.

Retiring after living in multiple jurisdictions

The typical British expat who lives in more than one jurisdiction makes pension contributions to pension authorities in more than one jurisdiction. If the jurisdictions are within the EU and the UK has social security agreements with those member states, then arranging retirement in either jurisdiction is fairly non-trivial as the video clip above shows. If at least one of the jurisdiction lies outside the EU, or you wish to retire to a location outside the UK, it is best to go with a Qualified Recognized Overseas Pension Scheme (QROPS).