Single Premium Offshore Life Policy

edited 16 January at 1:50PM in Savings & Investments
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NSG666NSG666 Forumite
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edited 16 January at 1:50PM in Savings & Investments
My wife and I have c.£300,000 invested in S&S ISAs but if we move to Portugal later this year they will no longer remain tax efficient as any growth would be taxed at 28%. Some of this is held in a ready made portfolio and some of it in a portfolio of funds I've put together using HL as the platform.
The suggested tax efficient alternative is a single premium offshore life policy. Can anyone throw any light on what these are, how they work and how you invest in them? 
Many thanks.

I've edited this following the 4 replies already received (I didn't initially want to bog anyone down with something I thought would be of little use to others).

We should be eligible for the NHR tax regime that now taxes pensions at a flat rate of 10% for 10 years after which we will go onto the standard tax rates (I'm still trying to clarify whether the first 4000e of pensions is tax free):
>7112e    14.5%
>10732    23%
>20322    28.5%
>25075    35%

The policies I'm querying are subject to tax on the growth element either as per the above table or at 28% however, after 5 years only 80% of the growth is taxed and after 8 years only 40% of the growth is taxed meaning a worse case scenario of 16.8% tax on total growth after 8 years.

The reason for using them is to minimise tax after NHR (we'll be 67) and for some high wealth people it could be beneficial to draw down their whole pension over 10 years at 10% tax and invest tax efficiently rather than being hit with tax at up to 48%.

I don't mind paying tax and indeed think I should as once we receive our temporary residence certificates we will have the same rights to Portuguese healthcare as any other Portuguese citizen. But, as per my attitude in the UK, if there are legal opportunities to minimise tax I think they should be taken.
Sorry I can't think of anything profound, clever or witty to write here.

Replies

  • bostonerimusbostonerimus Forumite
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    When looking at any insurance wrapper you must consider all the fees involved and be aware that whoever is selling the policy will try to hide those fees as much as possible. Why not cash in the ISA and use it to buy a house in Portugal. I think your UK pension will be tax free in the UK and for 10 years in Portugal and that you can minimize Portuguese tax by emphasizing dividends over capital gains in general investments.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • AegisAegis Forumite
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    When looking at any insurance wrapper you must consider all the fees involved and be aware that whoever is selling the policy will try to hide those fees as much as possible. Why not cash in the ISA and use it to buy a house in Portugal. I think your UK pension will be tax free in the UK and for 10 years in Portugal and that you can minimize Portuguese tax by emphasizing dividends over capital gains in general investments.

    I think they've now increased the foreign pension tax rate to 10%, otherwise this was a great idea and might still be far cheaper than taking it in the UK.
    I am a Chartered Financial Planner
    Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.
  • dunstonhdunstonh Forumite
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    When looking at any insurance wrapper you must consider all the fees involved and be aware that whoever is selling the policy will try to hide those fees as much as possible.
    You can get offshore bonds at pretty much the same cost as ISAs, pensions and unwrapped nowadays.   However, there are still some very expensive ones out there, in particular the tied agent distribution.  However, the differences in pricing is similar to buying best and worst in the DIY market.

    Offshore bond is more about deferring the tax until you are in a better tax environment.  e.g. higher rate now but basic rate later.  Or moving overseas now with the intention of returning later or moving to a more favourable tax regime.

     I think your UK pension will be tax free in the UK and for 10 years in Portugal and that you can minimize Portuguese tax by emphasizing dividends over capital gains in general investments.
    Getting as much into pensions before going to Portugal is a good idea.  That would be the most tax-efficient option as long as age is not an issue.  The pension wrapper beats ISA wrapper in the UK but the tax difference how Portugal treats pensions makes the pension wrapper the best of all.  Like Aegis says, at 10% its not as good as it was but its still better than ISA.





    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • edited 15 January at 7:38PM
    bostonerimusbostonerimus Forumite
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    edited 15 January at 7:38PM
    Why not just keep the funds with the potential of highest capital gains in the UK pension wrapper and then with any accounts outside the pension ie ISA, GIA use them for dividend and interest generating funds and accounts. How far can simple asset allocation get you down the tax efficient road.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • NSG666NSG666 Forumite
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    When looking at any insurance wrapper you must consider all the fees involved and be aware that whoever is selling the policy will try to hide those fees as much as possible. Why not cash in the ISA and use it to buy a house in Portugal. I think your UK pension will be tax free in the UK and for 10 years in Portugal and that you can minimize Portuguese tax by emphasizing dividends over capital gains in general investments.
    I agree about the fees and that's one of the reasons I was asking about these. When we first invested in S&S Isa's I didn't really understand them so probably paid hefty advice fees. After learning more about them and funds I opened the HL account.
    We have our UK house to sell with most of that then going into the Portuguese property.
    Sorry I can't think of anything profound, clever or witty to write here.
  • NSG666NSG666 Forumite
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    dunstonh said:
    You can get offshore bonds at pretty much the same cost as ISAs, pensions and unwrapped nowadays.   However, there are still some very expensive ones out there, in particular the tied agent distribution.  However, the differences in pricing is similar to buying best and worst in the DIY market.

    Offshore bond is more about deferring the tax until you are in a better tax environment.  e.g. higher rate now but basic rate later.  Or moving overseas now with the intention of returning later or moving to a more favourable tax regime.

    Getting as much into pensions before going to Portugal is a good idea.  That would be the most tax-efficient option as long as age is not an issue.  The pension wrapper beats ISA wrapper in the UK but the tax difference how Portugal treats pensions makes the pension wrapper the best of all.  Like Aegis says, at 10% its not as good as it was but its still better than ISA.
    Now I've edited my original post with additional information and I hope to live well beyond the end of the 10 year NHR tax regime it might make more sense why I'm asking and why pensions may not be the best approach.
    Sorry I can't think of anything profound, clever or witty to write here.
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