Sam Orgill of ProACT Partnership ponders was to get through the recession

Live till you die is what they say, but that may be sooner than you think with the way prices are. It could be of starvation, not being able to afford the rising food bills, or simply because you can’t afford the petrol to drive the supermarket. What to do, how to adapt to a world of rising prices and falling financial and asset prices?

Save Money – Stop Driving

The British government have a couple of handy suggestions “stop driving your car”. OK, so the government closes all the local shops, hospitals and workplaces so we all have to drive a distance then say stop driving - not very clever. This from a UK government that wants to add an extra runway and traffic to Heathrow, further centralising air transport from the UK, instead of building up regional airports.

Or you could work into retirement the government suggest. Good idea this, sold on the basis of keeping you busy and active in your old age. They forget to add that it will reduce the benefits and pension credits they will pay, increase the tax take from your work. They also ignore the proven statistic that the younger you retire the longer you live. Ergo work longer into retirement, get richer and die sooner - saving the government health service, nursing and residential care costs.

Lower Tax Bills

Some relief for Cyprus expatriate tax payers.  In a world of rising tax rates the combination of increased allowances and lower exchange rates means that many people are taken out of tax altogether this year.  UK expats will be able to receive up to £15,000 GBP before they start paying Cyprus tax.

Foreign pensions have a very favourable tax status in Cyprus and the maximum tax will only ever be 5%.  Anyone who is deferring taking a pension while living in Cyprus is making a mistake.  You won’t pay less tax on pension income anywhere in the world.  Why? Because pension income is generally treated as earned income in the country of origin.  Only by concession can you pay a lower rate by living as an expat abroad.  These concessions are determined by double taxation treaties.  Cyprus has many good ones allowing expatriates to pay the lower Cyprus tax rates on their world wide pension income.

If you lived in Dubai or Thailand, for example, you would be paying tax in your home country on pension income. This could be 40% or higher.

If you receive income from savings or investment you can pay no tax as a Cyprus resident. So review what tax at source you are paying on savings and investments and consider how you could hold these same investments without paying tax. Pay less tax and giving you more money to spend.

Increase Pension Income

What’s more, pension changes in the UK allow everyone the option to use ‘Income Drawdown’. This method of taking a pension allows you to control the income taken, keep capital invested and pass a lump sum to the beneficiaries of your will when you die.

You are no longer forced to take a pension annuity at any age – not even 75. Annuities are disliked because you receive a guaranteed income for life but lose all the capital to the state and insurers on death. Hence deferring taking a pension annuity was a way of ensuring a lump sum was paid to next of kin on death. This is no longer relevant.

So, if you have a deferred pension, consider this. Move to Cyprus, set up an income draw down and pay 5% tax on the income while retaining the ability to pass a lump sum in your will. Give yourself more income to enjoy life now while in low tax Cyprus.

A note of caution – don’t be duped by the QROPS marketing blitz. You can do ‘income drawdown’ without moving pensions offshore. If you move your pension to an offshore location your pension could become taxed there. Offshore transfers do add value with lower taxes on death. You can move an ‘income drawdown’ scheme offshore even if pension is being paid. Make sure if you pension transfer offshore you do it for the right reasons and that all the tax planning implications are considered in detail.

Free Review

ProACT offer free reviews of tax planning issues that can identify ways to reduce the tax you pay, increase your income, release value of tied up assets. ProACT offer a Will writing service including inheritance and capital gains tax issues. When monies to tight to mention then it could pay hansom dividends to squeeze those assets and give you more.

Sam Orgill

Tel: +357 26 819 424

www.proactpartnership.com

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