Transfer a Shell Overseas Contributory Pension Fund (SOCPF) Abroad to Hong Kong for Tax Purposes
This article will explain how to transfer a shell pension overseas to Hong Kong in order to take advantage of the many strong Double Taxation Agreements (DTAs) in Hong Kong which gives the taxation rights to Hong Kong rather than your country of residence at retirement.
For example, you can transfer your Shell pension scheme in Bermuda to Hong Kong and you will pay no income tax on your pension in retirement if you are resident in Austria, Belgium, Brunei, Canada, China, Czechoslovakia, France, Guernsey, Hungary, Indonesia, Ireland, Jersey, Kuwait, Lichtenstein, Luxembourg, Malaysia, Malta, Mexico, Netherlands, Qatar, South Africa, South Korea, Switzerland, Thailand, UAE or Vietnam.
Under the Shell Pension Scheme in Bermuda, you may still face income tax in those countries at retirement.
The Shell Overseas Contributory Pension Fund (SOCPF) is based in Bermuda. Members who are moving abroad and want to reduce their tax bill may transfer the SOCPF to an Occupational Retirement Scheme in Hong Kong and in many cases, their tax bill may be reduced or even be zero. The Trustee of the SOCPF is Shell Trust (Bermuda) Limited, a corporate Trustee, with Trustee Directors who are appointed by Shell. Because the oil & gas pension fund is based in Bermuda, not the UK, the monies are not UK tax-relieved and means that any pension transfers do not fall under the remit of HMRC and hence, do not have to follow HMRC overseas pension transfer (QROPS) rules.
This means the SOCPF can be transferred directly to a Hong Kong ORS for tax, currency and investment purposes.
Management of the SOCPF
Management of the Shell Overseas Contributory Pension Fund Bermuda.
The SOCPF, whose pension trustees are based in Bermuda is managed by the Shell Asset Management Company B.V. in the Netherlands. You can read more about the management of the Shell fund by JPMorgan here. Here is a press release showing assets under management for SAMCo.
Tax on the SOCPF if You are UK Tax Resident
Tax on the Shell International Pension Fund if you are tax resident in the UK.
The Finance Bill 2017 introduces some changes which will have effect from 6th April 2017. Please note that these changes are as a result of changes to UK tax legislation. Neither the Company nor the Trustee are changing the benefits to the SOCPF as a result of these changes to UK tax legislation. The expected effect on the UK taxation of SOCPF benefits for UK tax residents is anticipated to be as follows:
- Pension income: Currently only 90% of pension income paid from the SOCPF is subject to income tax. With effect from 6th April 2017, 100% of pension income, irrespective of when it was accrued, will be subject to tax. This aligns with the tax treatment of pension income paid from the SCPF.
- Lump sum: On retirement, members can choose to exchange 25% of the value of their pension income for a cash lump sum. Currently this lump sum may be paid tax-free (if you were not a UK tax resident during the period of accrual) which aligns with the SCPF. With effect from 6th April 2017 lump sums in respect of benefits accrued after 6th April 2017 will be subject to income tax at an individual’s marginal rate.
Please note that both pension income and cash lump sums are paid from the SOCPF gross, i.e. with no deduction for tax. It will be your responsibility to ensure that the correct amount of tax is paid to the relevant tax authority in your country of residence when drawing benefits.
Transferring the SOCPF to Hong Kong
You can transfer the Shell pension scheme in Bermuda (SOCPF) to a Hong Kong Occupational Retirement Scheme (HK ORS) for tax, currency and investment purposes. Let’s take a look at some of the reasons why you may transfer an overseas Shell pension plan to Hong Kong:
Benefits of Transferring a SOCPF to a Hong Kong ORS
Reasons for transferring the Shell International Pension Fund to Hong Kong
- There is no tax on income, growth or death in a Hong Kong ORS
- There is no tax on income in the following countries if you receive your pension there in retirement thanks to the Double Taxation Agreements giving the taxation rights to Hong Kong:
Austria, Belgium, Brunei, Canada, China, Czechoslovakia, France, Guernsey, Hungary, Indonesia, Ireland, Jersey, Kuwait, Lichtenstein, Luxembourg, Malaysia, Malta, Mexico, Netherlands, Qatar, South Africa, South Korea, Switzerland, Thailand, UAE and Vietnam
- Your Hong Kong pension is protected from creditors in the event of bankruptcy, court seizure and divorce
- You can choose the investments you hold
- You can choose the currency of your pension scheme: this is very useful to avoid exchange rate movements reducing your pension income
- Under a Hong Kong ORS, your chosen spouse, partner or beneficiary receives 100% as a tax-free cash lump sum payout upon death. Under the SOCPF, your spouse may only get 60% of your pension on death and if you are divorced, any partner may receive zero on death if you have not informed SOCPF and children won’t receive 100% of your pension pot. You can read more about the SOCPF benefits upon death here. You can read the detail at the SOCPF explanatory booklet.
- A final salary pension may have a very high Cash Equivalent Transfer Value (CETV) due to the current low interest rates (yields on 10 year UK government gilts)
Please note that if you transfer out of a final salary pension scheme, you lose any guaranteed benefits, i.e. your pension will not give you a guaranteed income that rises with inflation, it would rise and fall with the markets every year.
Transferring Out of the SOCPF
There are different rules for transferring out of a Shell Overseas Pension Plan depending on whether you are still with Shell or you have left the company.
You can only transfer to a Hong Kong pension scheme if you have left the company. You can read the transferring out of the SOCPF Factsheet here.
If you are still working at Shell, you can only transfer out of the Shell Overseas Pension Fund to a UK SIPP (Self Invested Pension Plan).
Eligibilty for Transferring Out of the SOCPF
If you left Shell having completed at least two years of pensionable service, you can request a Cash Equivalent Transfer Value (CETV) for the SOCPF and you are entitled to transfer your retirement benefits to another Pension Scheme overseas provided that:
- Your benefits are not yet in payment; and
- The new scheme will accept your transfer
If you have opted out of the SOCPF (elected to leave the SOCPF whilst remaining in employment with Shell) having completed at least two years of pensionable service, you are entitled to a pension from the SOCPF or you can transfer to another pension scheme in the UK.
You can request a CETV and transfer your benefits to another Pension Scheme provided that:
- Your benefits are not yet in payment;
- The new scheme will accept your transfer; and
- The new scheme is an arrangement in the United Kingdom (e.g. you can transfer to a UK SIPP)
What is the CETV?
The CETV is the Cash Equivalent Transfer Value, the capital value of a members pension benefits under the Scheme. In other words, it is the total value of your pension pot should you decide to transfer.
A CETV is calculated as the present value of your benefits in the SOCPF. The cash equivalent is the amount that would be sufficient within the SOCPF, at the date of the calculation, to provide your pension at your pension age based on pensionable service to date. It is based on appropriate actuarial assumptions, which may change over time, decided by the Trustee, having taken the advice of the SOCPF Actuary.
A CETV quotation is guaranteed for three months from the calculation date for deferred members.
How to Transfer Out of the SOCPF
How to transfer out of the Shell Overseas Contributory Pension Fund:
- Request a CETV by emailing or phoning the Shell pension team: the Pensions Administration Team will send you a transfer statement confirming the guaranteed CETV. The statement will include a waiver form to be completed by you. The waiver form confirms that you agree to waive all present and prospective rights from the SOCPF for yourself and your qualifying spouse, children and dependants in return for taking a transfer of your SOCPF benefits
- Speak to a pension specialist: We can help fill in the application forms for the transfer and set up the new Hong Kong ORS or UK SIPP and provide specialist financial advice
Shell Pension Fund Contact for SOCPF
Shell Pensioners’ Website: How to contact the Shell Overseas Contributory Pension Fund (SOCPF).
Pensions Administration Team, Trustee Services Unit (TSU), Shell International Limited, Shell Centre, London SE1 7NA
Telephone: +44 (0)20 7934 1190
Please contact a pension transfer specialist here concerning a transfer from the SOCPF to a Hong Kong ORS.How to Transfer a Shell Pension (SOCPF) to Hong Kong by Richard Malpass