Transferring Wealth From Your RBC IPP

Since 2006, the benefits of basing your retirement around an international pension plan (IPP) have drastically changed. Although it was once a popular scheme with employers, the incentive no longer allows those within to avoid paying national insurance contributions. As a result, we’re seeing an increasing number of individuals request to transfer out.  

Previously, IPP schemes were used as a lure to attract the top talent in finance. Large investment banks would actively encourage their employees to participate in the schemes so that they too could benefit from the subsequent tax implications. The rules have since changed, however, and those employees who took advantage of the scheme, and continue to pay for it, no longer enjoy the same tax efficiency. 

Of course, this has led to a rise in individuals seeking the support of independent financial advisors (IFAs), to help them transfer their wealth out of these offshore accounts, and withdraw funds without significant charges. Here, we explain why that is, and how you can do the same. 

First things first, if you’re asking yourself ‘what is an international pension plan?’ then let us explain. Prior to 2006, UK Inland Revenue permitted tax concessions to non-domiciled individuals who are employed in the UK by a foreign employer, and resident or ordinarily resident in the UK for tax reasons. 

These schemes had no limit on earnings that could qualify for benefit purposes. This meant that high earners could place large contributions into the scheme and pay zero national insurance on what was dubbed a ‘bonus sacrifice’. Likewise, employers benefited from the scheme, as they didn’t have to pay the contributions either. 

The result? All income and gains within an international pension scheme would grow largely tax free. Or at least they used to. In 2006, the UK changed its pension policy and introduced a series of reforms to prevent such individuals from enjoying the low taxation previously associated with these accounts. 

Your contributions depend on your circumstances and the nature of your IPP. That being said, post-2006 schemes do count towards your overall lifetime allowance. This is the overall limit of tax privilege pension funds that you can accrue in your lifetime before a charge applies. So, if you did opt in before 2006, you may be closer to your lifetime allowance than you initially thought.

It’s worth considering this for the sake of your estate planning. For example, the lifetime allowance in the tax year 2021/22 is £1,073,100. This will remain at this figure until at least the tax year 2025/26. The allowance applies to the total of all the pensions you have, including the value of pensions you have through: 

1. Any defined benefit (final salary or career average) schemes you belong to 
2. Any savings you have in defined contribution pensions, excluding your State Pension 

You might have heard A-day mentioned in reference to the changes in pension policy. The phrase refers to the date that the pension reform was introduced: 6th April 2006. Its relevance to IPPs is that those who signed up before this date were sold drastically different benefits for the scheme than those who joined after. Of course, this is through no fault of the providers themselves, but the law that introduced the changes. 

Those who joined prior to that date have essentially been transferred into a completely different scheme. As a result, when IFAs mention pre and post-A-day, they’re talking about two variations of what is generally regarded as an IPP. 

No, both RBC and JTC international pension plans are just regular IPPs. Many of the clients we deal with will have signed up with either of these organisations, or similar companies in the past. Today, both JTC IPPs and RBC pension payments don’t offer the same benefits they did previously. As the scheme no longer exists, they’re unable to encourage others to opt in. 

For this reason, it’s very much in the scheme’s interests to keep clients such as yourself from transferring their wealth. However, to compensate for the loss of new business, they typically have hidden fees and ongoing charges that you may not fully be aware of. These costs can drain your assets and shouldn’t be ignored, but we appreciate how difficult it can be to fully break down your position. 

As we’ve mentioned, IPPs have expenses that aren’t always worth paying post-2006. They also have limited fund ranges and costly dealing expenses that customers don’t necessarily recognise at the time. It's this investment inflexibility that motivates customers to request to transfer their money. 

Another issue is that having multiple pensions across various schemes leads to uncertainty upon instances such as death, drawdown, and management. And, as you get closer to retirement, the last thing you want is to have to navigate numerous schemes. This is where an IFA can assist, and present your wealth in a way that’s much easier to understand. 

We’re experienced independent financial advisors, so we know first hand the difficulties you can face when transferring out of an IPP. Our team has advised several clients, and can offer you an unbiased opinion on the most beneficial place to store your money. Then, should you wish to move your finances across to another pension, we can handle the entire transfer for you. 

Other IFAs have hidden fees, but at Adsen Moore, we provide a transparent service that’s affordable and accessible for all. We recognise that some organisations complicate retirement savings, that’s why we aim to change that practice through our advice. If you’d be interested in finding out how, get in touch today on 0203 432 5564, or use our online contact form to arrange a call back.