Tim Bush goes through the opportunities presented by utilising QNUPS as part of retirement planning
In recent months, pensions have dominated the news headlines. The underlying theme is that the comfort zone people of previous generations have experienced with their pension provisions is long gone. Many existing schemes and government fund pension arrangements are no longer going to provide the level of retirement support that people were expecting.
With people now having longer and healthier lives, prudence suggests serious thought be given to maintaining a comfortable lifestyle in their retirement.
There are many opportunities for any pension gap to be covered by a plethora of products, from the traditional annuity scheme backed by a life assurance product to a SIPP.
However, there are some scenarios where even these arrangements may need some supplemental support.
Switching to a QNUPS
QNUPS came about as a result of a statutory instrument introduced in 2010. These schemes, as expected, have opened up further options for the growing expatriate community, but have also provided some opportunities for UK residents/domiciles.
One example is if an individual has a high level of earnings and wishes to contribute to a scheme an amount that is more than the amount they can contribute and still receive tax relief, they could join a QNUPS.
There is no ceiling of the amount they can contribute, provided the amounts are appropriate to the individual's circumstances, and are part of a bona fide pension planning scheme - so as not to incur anti-avoidance provisions.
It should be noted that there is no tax relief available to any contributions made to a QNUPS.
Another way could be if an individual has built up or received assets (say from an inheritance or a divorce settlement), and was relying on the benefit of these assets for their retirement.
Outside of a pension scheme, a QNUPS could, if planned properly, mitigate their exposure to capital gains tax, income tax and inheritance tax.
One benefit of a QNUPS is that there is no need for the contributions to come from earned income, but can come from many types of asset from investment portfolios to property to antiques.
A QNUPS allows the following additional opportunities. The first is that the individual may request that the trustees advance them a loan.
The requirements of this would be that the loan is advanced on commercial terms, is secured and, importantly, is repaid before any drawdown or lump sum is paid.
The second opportunity is that a lump sum of 30% of the fund may be withdrawn before retirement drawdown commences.
The third is that a QNUPS is a product written under a trust deed. It is not necessary to follow a traditional retirement annuity on retirement. The pension drawdown can be made from the funds held based on actuarial rates and after death the funds are distributable to the individual's nominated beneficiaries.
The QNUPS is not part of the individual's estate and, subject to proper planning, will not incur UK inheritance tax which is currently 40% of assets held above £350,000. Significantly, a contribution to a QNUPS gets this relief immediately and does not need to wait for the seven years that a gift would under the Potential Exempt Tax rules.
Finally, a QNUPS is a trust structure written under Guernsey law which is the leading jurisdiction in the provision of international pension schemes. Guernsey sits in the forefront of locations offering a range of pension solutions, from Employee Share schemes, QROPS and International Pension Plans.
It has a proud reputation for having a robust system of regulation, professional infrastructure, and a cutting edge for innovation and commercial sense in its practice.
Tim Bush is director of Carey Pensions & Benefits
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