International Pension Strategies
Strategies Using International Pension Contracts (IPC)
Salary Bonus/Sacrifice: If an employer and employee agree to re-draft their contract of employment then any salary sacrifice or bonus paid directly into a IPC by the employer in certain circumstances may not attract any NI or Income Tax on contributions made by the employer for the benefit of the employee.
Personal Contribution out of Taxed Income: Company ’A’ pays a bonus to employee ‘B’ (who is taxed on the income) and then invests the net monies into a QNUPS. The administrators of the IPC can subsequently use the funds to purchase shares in company ‘A’ or subsidiaries of the company. The benefit is that for one tax payment all future dividends will flow to the IPC free of taxation and the underlying assets in the IPC will grow free of tax.
Corporate Contributions to QNUPS: Contributions to IPC should not be caught under the Earmarking or Disguised Remuneration Legislation if contributions are in line with UK pension legislation i.e. £50,000 pa and the ability to go back 3 years in year one.
SSAS: Have problems lending the majority of their funds into the company under UK legislation. If there is a family member over age 55, funds can be used to purchase an International Pension Annuity (funds now outside UK pension legislation). Member elects to take an income of 50% of GAD and subsequently the directors of the scheme can make a commercial loan to the company of a significantly higher proportion than under SSAS rules.
Annuity Purchase by Trustee’s of EFRBS/EBTS: HMRC’s view is that the purchase of a Deferred Annuity by trustees of either an EBT or EFRBs can be caught under the disguised remuneration legislation (caught under the third party rules). We believe that there is a solution for members who are over the age of 55 (if UK tax resident), potentially from age 50 (if not UK resident) or have protected early retirement (e.g. some sportsmen). HMRC have confirmed in their most recent frequently asked questions that the Disguised Remuneration will not bite on an annuity PURCHASE. The trustee of an EFRB then can purchase an annuity and begin making payments without triggering a charge under Part 7A of the Finance Bill 2011 (Disguised Remuneration). Payments can be taken between 50 – 100% of GAD using Lifetime Annuity.
The EBT position is slightly different in that only those EBT’s that make provision for pension payments would be able to make the annuity purchase (subject to a review and tax sign off).