QROPS Transfers and International Pensions for South African Expats

International Pension Planning for South African Expats

South Africans who are working in London or elsewhere in the world can set up an international pension plan to avoid taxes back home in South Africa. They can avoid donations tax, CGT and IHT.

If they have paid into a British pension plan, they can also move this pension offshore to avoid taxes if they are retiring outside of the UK at a later date. They can avoid the UK tax upon death and UK income taxes.

The International Retirement Plan for South African Expats

Sovereign’s Conservo International Retirement Plan is proving extremely popular in South Africa and with returning South African expats across the globe.

The Conservo is a Guernsey-based 40EE International Pension Plan (IPP), which offers significant tax advantages for South Africa-based retirees.

The Benefits of the International Pension Plan for South African Expats

  • Can access at 50 years old
  • Avoids South African Donations Tax
  • Avoids South African Estate Tax
  • Can mitigate Capital Gains Tax in S.A.

Contributions to Conservo usually fall outside the scope of South African Donations Tax.

Once invested, the underlying assets will generally grow tax free and without source taxation in Guernsey. Retirement benefits may be accessed from age 50 and the member may elect whether to receive: a lump sum; an income stream; or a combination of both.

Capital paid into the plan will be returned to the member without any tax liability in South Africa. With appropriate structuring the plan may also mitigate South African Capital Gains Tax (CGT) liabilities on investment growth.

On death, the Conservo’s assets will usually be exempt from South African Estate Duty. There is also the option for assets to be passed into a new trust for surviving beneficiaries. The Conservo offers unrestricted investment options and the facility to make regular monthly contributions. Existing assets may be transferred to the plan in lieu of cash contributions.

The plan offers a very competitive charging structure, which starts at £750 to establish and £900 as an annual administration fee. (2014 prices)

QROPS for South Africans Who Have Worked in the UK

South Africans who have worked in the UK and built up a substantial pension can transfer their UK pensions to a QROPS to avoid UK taxes.

  • Avoid 55% tax upon death
  • Avoid UK income taxes of up to 45%
  • Transfer your pension to Rand or keep in GBP or other currencies
  • Choose from the top hedge fund managers in the world
  • Pass 100% of your pension on to whomever you like upon death
  • Make estate planning much easier
  • Target higher returns through effective financial planning

Please email us for more information and ask the QROPS Specialists a question.

QROPS and IHT Planning for the Children

“QROPS and IHT planning for children and future generations. Protect your QROPS even after your spouse’s death from IHT with a Succession Trust.”

Succession Trust Planning to Avoid IHT on a QROPS for the Children

We already know that a QROPS avoids 55% tax upon death and UK income taxes of up to 45%. 100% of the pension pot gets passed to the spouse or named beneficiaries upon death within a QROPS.

But, what happens to the spouse? What happens when she dies? Is there a way to avoid 40% inheritance tax (IHT) on any monies she has left?

The Succession Trust Planning for QROPS

Fortunately, Sovereign Trustees have come up with a plan to protect future generations from inheritance tax through the formation of a succession trust.

The succession trust has been designed to receive lump sum death benefits from a QROPS (Qualifying Recognised Overseas Pension Scheme) and to provide enhanced planning opportunities for surviving beneficiaries.

It is well known that a QROPS provides very tax efficient lump sum death benefits, including an exemption from UK Inheritance Tax (IHT). However, it is also important to consider the future tax position of the recipient of those death benefits: usually the spouse or partner.

Where a surviving spouse dies having previously received a QROPS lump sum death benefit, any unspent monies will usually form part of that spouse’s estate.

As an alternative, the Succession Trust enables the pension scheme trustees to transfer assets seamlessly into trust when the QROPS member dies. The Succession Trust can then provide for the surviving spouse. On the death of the surviving spouse the Succession Trust will continue to provide for other beneficiaries such as children, but will avoid the delays of probate and cost of IHT on the spouse’s death.

Any existing or prospective QROPS or QNUPS (Qualifying Non-UK PensionScheme) member is entitled to establish a Succession Trust, which effectively remains dormant until the death of the QROPS member. The Succession Trust is competitively priced with the Malta version costing only €400 to establish and €250 each year whilst dormant.

Once the Succession Trust has received the QROPS death benefits and is active, the annual charge will be approximately €1,500.

Please email us at qropsspecialists.com for more info.

Transferring a Dutch Pension Scheme Overseas for Tax Avoidance

Moving a Dutch Pension Overseas to Avoid Dutch Taxes

Dutch expats who are moving overseas and retiring abroad permanently can transfer their Dutch pensions offshore to a Malta Retirement Benefits Scheme to avoid Dutch income tax, any capital gains tax and the Dutch tax upon death.
dutch-pension-transfers-overseasIf you move from the Netherlands to another country overseas, there can be tax consequences to emigration.

In accordance to the Pension Act, an International Value Transfer (IVT) of pension benefits, accumulated in the Netherlands to a foreign country, is possible under certain conditions. You can transfer your pension accruals to various EU and non-EU pension schemes as well as to supranational organizations.

International tax-free transfers of pension benefits are only possible if approved by the tax authorities.

You will need to PHONE both your pension company and the Dutch tax authorities, the Belastingdienst. Phone numbers are below.

Once the Dutch tax authority and your pension company allow a transfer, we can help you invest with the top investment fund managers offshore.

“You can transfer to a Malta or Gibraltar Retirement Benefits Scheme for tax avoidance in the Netherlands”

This is known as a European Union Retirement Benefits Scheme (EURBS).

Why Transfer a Dutch Pension Overseas?

  • Avoid Dutch taxes
  • Avoid income taxes of 2.3% – 52%
  • Avoid the wealth tax in the Netherlands
  • Avoid Dutch inheritance tax (IHT) or estate tax of 5% – 63%
  • Choose beneficiaries of your pension on death
  • Your spouse, children or named beneficiaries get 100% of your pension as a cash lump sum upon death
  • Multi-currency options
  • Choose from the top mutual fund managers,  hedge fund managers, shares, bonds or ETFs that you wish

The 2014 budget in the Netherlands will hit Dutch pensions hard. Some of the changes mean that

  • Pension accruals (pension savings) will reduce for employees
  • Survivor pensions payable on death would be reduced
  • In the event of disability, the level of insured coverage would be lower than at present
  • Reduced risk coverage

Will My Dutch Pension Scheme Allow a Transfer Overseas?

As of January 1, 2007, certain provisions concerning international transfers of pensions for Dutch expats moving overseas were incorporated in the Dutch Pensions Act (Pensioenwet).
Some of these provisions impose new obligations on pension funds.

Thus, your current pension scheme is now obliged to co-operate in certain situations and must decide themselves whether the conditions are met to allow a transfer.
In other situations the pension administrator has the discretionary power to decide whether or not to co-operate; in these cases too, certain conditions apply.

The pension administrator has thereby acquired a personal responsibility with regard to international value transfers.

In other words, your pension scheme has the ability to say yes or no to allow the transfer. If they say no, you may have to get a lawyer or ombudsman involved if you are determined to move it.

If you have problems transferring your pension overseas, you should refer your current pension provider to this document and ask them to look at the questionnaire on page 6 which covers international pension transfers to the EU. There is also a form for institutional transfers and transfers outside the EU.

Protective Assessment

When Dutch expats move abroad, you will need to assess your tax position. You may be sent a separate assessment for income on which you currently do not pay any tax yet, but may have to do so in the future. This is known as protective assessment.

If you move from the Netherlands to another country, you cannot file your tax return digitally in the year you move abroad. You must fill out this M form.

When requesting the form, you need to state your name, address and put your citizen service number, tax number and social security (sofi) number in your letter.

You can request the M Form from the Belastingdienst.

The protective assessment means that if you try to “cash-in” your pension in the 10 years after you emigrate, the Dutch tax authorities can retrospectively tax you.

Tax Information Phone Number for Non-resident Tax Issues

Here is the number to call to avoid Dutch taxes when moving overseas.

Telephone number in the Netherlands: (055) 538 53 85
Telephone number from abroad +31 555 385 385

Opening times
Monday to Thursday: 08.00 – 20.00 hours. Friday: 08.00 – 17.00 hours.

You also need to fill in this form, letting them know of your change of address.

How to Transfer a Dutch Pension to a European Union Retirement Benefits Scheme (EURBS)

Q. How do I transfer my Dutch pension to a pension in Europe?
A. You need to contact both the Dutch government’s tax revenue collection agency, the Belastingdienst, and you will also need to contact your current pension providers and ask them for an International Value Transfer (ITV).

Which Dutch pensions qualify to transfer overseas?

You cannot transfer Dutch state pensions (pillar 1) overseas. You can transfer second pillar and third pillar pensions though. That is those pensions where the employer and a member have contributed to a pension and private pension contributions.

Any Dutch pillar II pension can be transferred overseas if your current pension providers and Dutch tax authorities allow it.

In particular, The Pensioenfederatie and Verbond van Verzekeraars, as well as the pension scheme administrators APG, Syntrus Achmea, Nationale-Nederlanden, DSM Pension Services, PGGM and the Dutch Shell Pension Fund have set up a group specifically to deal with pension transfers overseas – the “Joint Working Group on International Value Transfers”.

What Happens if I Return to the Netherlands within 10 Years?

The protective assessment would be removed and you would have to retrospectively pay Dutch taxes.

The basic rule in the Netherlands is that a value transfer is treated for tax purposes as the commutation of a pension, which constitutes grounds for levying wage tax on the transfer value (Article 19 b (2) of the Wages and Salaries Tax Act [Wet LB] 1964).

Under Article 19b (6) of the Wages and Salaries Tax Act 1964, an international value transfer in the context of an acceptance of employment outside the Netherlands does not entail fiscal consequences (i.e. no tax is levied – this is an untaxed value transfer).

However, certain conditions must then be satisfied, as specified in the Decree (Besluit) of January 31, 2008, No. CPP 2007/98M, Government Gazette (Staatscourant) 2008, No. 27 (International aspects of pensions).

The conditions imposed by this Decree have likewise been re-expressed as questions and incorporated in the model questionnaires. Consequently the model questionnaires may also be used to verify, for tax purposes, whether the conditions have been met.

An important aspect of untaxed value transfers is that the Tax and Customs Administration (Belastingdienst) does impose a protective assessment (conserverende aanslag) or exit levy.

If it transpires, after the value transfer has been effected, that the stipulated fiscal conditions have not been fully satisfied, then the Dutch Tax and Customs Administration can recover the tax due by means of this assessment.

i.e. if you move back to the Netherlands within 10 years or do not satisfy the Dutch rules for pensions (e.g. you try to cash your pension in), the Dutch tax authorities will come after you.

The Tax and Customs Administration can sign an agreement with the Receiving pension-paying institution in which the latter assumes liability for the tax and revision interest payable by the employee with pension entitlements.

For this purpose the foreign pension administrator must assume, in writing, liability for the protective assessment vis-à-Vis the Tax and Customs Administration, and accept post-transfer liability.

Alternatively, the employee himself may provide sufficient surety to the Tax and Customs Administration.

If you need help transferring your Dutch pension overseas, please contact us for a free assessment.