How To Transfer Your Shell Pension (Shell Overseas Contributory Pension Fund /SOCPF)
As The Pension Transfer Specialist, Cameron James has worked with a wide range of clients from varied backgrounds and occupations. We've been dealing with UK employees working worldwide, whether in the United States, the European Union, or another third country. However, there are also occurrences when our client works as an oil and gas expert for Shell and lives in a third country and is searching for the best choice to transfer their pension assets into another qualifying UK-based scheme.
In this article, we will discuss how to transfer your Shell Pension to the country you're residing in. Before discussing further, you may want to watch a video explanation by our CEO and Independent Financial Advisor, Dominic James Murray.
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Shell Overseas Contributory Pension Fund
Shell, as a firm, has established the Shell Overseas Contributory Pension Fund, or SOCPF plan, to assist those who are living and working abroad but still working for Shell on a UK contract from possibly being placed in a higher tax rate. For people who do not work in the UK, this Shell Pension Program is only available and regulated in Bermuda; it is a strong, well-funded final salary pension scheme. Because of the high level of expertise of the employees, as well as the high levels of salary, massive benefits are built up over time in the SOCPF.
What if I Want To Transfer My SOCPF Pension?
When people leave Shell, they are typically offered transfer values ranging from a few hundred thousand to a few million pounds. Due to the irregular nature of this pension, clients may encounter certain issues while transferring it. The issues might arise everywhere from deciding on the best pension transfer advice to selecting the most appropriate scheme to transfer to.
Pension Transfer Scam
What must be kept in mind is that this type of plan and the transfer process behind it may be subject to plenty of scams and fraud, putting you in an unexpected financial situation or, in the worst-case scenario, causing you to lose your pension funds. The main concern with these plans is that, despite their size, they are not recognized as a defined benefit UK pension scheme, which means that persons who are members of SOCPF do not need to contact an FCA licensed financial advisor to complete the transfer.
This policy can frequently result in a lack of transparency, with some advisors charging up to 5-7% commission. This is not ideal for the members of SOCPF, who are frequently unaware of these costs.
If you have one of these plans and need assistance on how to transfer it to some other plan, you must work with a trustworthy IFA that has transparent pricing and an exceptional track record. We've dealt with Shell schemes previously, but this particular client case was quite intriguing, so we wanted to share it with everyone since there are plenty of people out there who are trying to figure out how to transfer funds.
Aside from pricing transparency, SOCPF members may experience a lack of information transparency. Some of our clients who had formerly worked with other IFAs were not given complete information about the issue and the transfer procedure. At Cameron James, we went through a lengthy consultation process with our clients that often lasted five to six weeks, with email chains ranging from 20 to 30 emails. This lengthy procedure is part of our commitment to providing our clients with the most transparent information possible, so they know precisely where they stand and what the best transfer option available on the market is.
What Options Are Available for the SOCPF Member?
As an example, we are dealing with a British Chinese national who was resident in a third country, was a UK national or holder of a UK passport, but was enrolled in a pension system in Bermuda, he has pension savings were valued at 1.2 million pounds and wishes to transfer his pension into one of the qualified UK pension schemes. Thus, there's a complicated circumstance to begin getting his head around; inside Shell, he has several documents that come from Shell that he must deal with.
Our client wanted to do his research and acquire the greatest offer in the worldwide market, so he compared us to three or four different financial counselling businesses. The information and advice he received from three or four businesses, including ours, was entirely different, and it highlighted to us how this individual could have gone and received advice from someone else and appeared very professional, but the advice they were giving him was of very terrible quality.
In general, he has three alternatives for transferring his pension scheme accessible on the market: QROPS, an International SIPP, or QNUPS. However, each of these three options has a unique tax treatment.
Qualifying Recognized Overseas Pension Scheme (QROPS)
The first option available to him is to transfer to a QROPS. A QROPS is an international pension system based in Malta that accepts transfers. Malta has designed QROPS systems that comply with HMRC regulations and Malta pension legislation. Malta is also one of the most renowned QROPS nations and does not clash with HMRC standards. Persons moving their Shell Pension to a QROPS in Malta would benefit from significant tax flexibility.
However, QROPS is not the best option he has because the third country where he was staying did not have a double taxation agreement in place with Malta and that would be a regular jurisdiction in which he would complete the QROPS transfer (Qualified Recognized Overseas Pension Scheme). Any transfer of non-UK pensions to a Malta QROPS would be unable to perform FAD, posing withdrawal constraints upon retirement.
We carried out a thorough review of the Qualified Recognized Overseas Pension Scheme or QROPS. Read here to learn more about QROPS and associated tax implications.
International Self-Invested Personal Pension Scheme (iSIPPs)
The alternative option is to transfer the SOCPF fund to an international Self-Invested Personal Pension Scheme, or iSIPPs. International SIPPs allow him to manage his pension fund from wherever he resides, as well as have access to a broader and more powerful variety of investments. He can withdraw up to 25% of his investment as a single amount and determine how much to withdraw from the fund for his needs each year. Using an International SIPP would allow him to tailor the timing and quantity of cash and income to his specific needs.
However, as we all know, all pension plans worth more than £1.07 million are subject to the UK Lifetime Allowance, thus choosing an International SIPP would result in a significant tax on the pension pool. The Lifetime Allowance (LTA) is the maximum tax-free pension fund that a person can save over their lifetime. Any value he accrues over the LTA will be taxed at 55% if taken as a lump sum benefit, or 25% if taken as income. If the value exceeds the lifetime allowance, any excess is subject to a 25% tax penalty if taken as income.
Qualifying Non-UK Pension Scheme (QNUPS)
We had to look into other options with the client, which ended up being a QNUPS located in Guernsey, which was appropriate for the client's position because there is no tax deducted at the source even though there is no double tax agreement (DTA) exists between his nation and Guernsey. There are no DTAs existing in Guernsey, since they simply do not tax foreigners who get income from any of their assets in Guernsey. The only restriction is that if you become a resident of Guernsey, you must pay income tax on any withdrawals.
QNUPS is a tax-efficient strategy for UK citizens, particularly Shell Pension holders, to save wealth taxes on pension assets and protect assets on death to be distributed to their beneficiaries. QNUPS tax treatment is a good strategy for him to save his pension from being taxed by HMRC.
How Cameron James Can Help You
If you are a member of the SOCPF and are considering transferring from the SOCPF, take financial advice before making the transfer. Otherwise, you may be in for a costly surprise. Financial advisors must be honest and transparent; they must inform you precisely how much money they would get if you make the transfer.
Contact Cameron James now to discover the best QNUPS and QROPS service for you. Cameron James offers fixed fee pension transfer guidance for final salary pension transfers. Book for a free initial consultation with one of our experienced and qualified IFAs through the button below.