EURBS: Are they the new QROPS?
Expatriate clients, many of whom move from country to country over the course of their lives, require a totally different strategy to those who live all of their lives in the UK, if they are to get the most from their accumulated wealth after retirement.
This is why we at the deVere Group are excited about, and are currently recommending to many of our clients, a savings product known as European Union Retirement Benefits Schemes (EURBS), (variously pronounced “urbs” and “ay-urbs”).
EURBS are not, strictly speaking, new. Like the UK’s Qualifying Recognised Overseas Pension Schemes, they have their origins in pan-European pension law adopted in 1998 and subsequently added to, which enabled occupational pensions to be moved freely between member states whenever a pensionholder retired to live in another EU jurisdiction.
However, the adoption of EURBS has been slower than the take-up for QROPS, mainly because they have been more difficult to arrange.
Even now, some would not normally be attempted, such as the transferring to another European country of a French pension, for reasons having to do with the French pension system.
Also unlike QROPS, EURBS are by definition limited to Europe. This means that an EURBS could not be set up in New Zealand, say, for an emigrating Dutchman keen to bring his pension there with him.
That said, EURBS share a number of advantages with QROPS – but unlike them, will not be affected by the proposed changes announced last month to existing QROPS legislation by HM Revenue & Customs.
What this means for clients who move abroad is that they may be able to transfer their accrued pensions to a still-secure but significantly more tax-efficient jurisdiction than they are in at the moment. (At deVere, we favour Malta for our EURBS, because unlike some of the major QROPS destinations it is in the EU and has 56 double-tax agreements, in addition to being a well-regulated, English-speaking jurisdiction.)
Not just about tax
EURBS are not just about tax advantages, though. As is the case with some QROPS, they enable a client potentially to withdraw up to 30% of his or her pension fund in a tax-free lump sum (depending on where they are resident at the time they make their move).
By transferring into an EURBS, the client also gains greater scope to change his or her pension from one currency to another, as well as getting greater control over the fund’s underlying investments. Importantly, EURBS also enable clients to pass on their pension assets to their beneficiaries when they die.
As most financial advisers know only too well, there are few pensioners who live overseas who would not want to increase the potential for flexibility and income of their pensions.
This message has come through loud and clear to us at deVere as well, where we have more than 60,000 expat clients, many of whom are pensioners or on their way to retiring soon. For them, EURBS directly address both of these concerns.
In our view, responsible advisers who have clients of any nationality who are thinking about moving abroad, or who are already expatriate, should be talking to them about the possible use of EURBS to unlock their European pensions.
Mike Coady is a director at international advisory firm, deVere Group
This article was updated on 05.01.12 to amend a mistake made by IA during editing