Benefits of QROPS for UK Pension Holders
David Howell, Managing Director of Guardian Wealth Management examines the benefits of QROPS for UK pension holders who either live or are planning to retire abroad
If you are one of the many people who have built up a pension pot under the UK tax rules but who has retired abroad or is planning to do so on a permanent basis, QROPS (Qualifying Overseas Pension Schemes) can provide you with a beneficial retirement income solution.
Since QROPS were created under HM Revenue & Customs (HMRC) rules just over four years ago they have become very popular. This is because they allow considerable freedom of investment alongside other benefits that schemes kept in the UK do not allow.
Indeed, if you are retiring abroad pensions retained in the UK can be restrictive in terms of how and when you take your benefits and those restrictions can increase once you reach age 75. What’s more, when you die, it is likely the tax man or an insurance company will get all or a large chunk of your remaining pension pot. So, for people who are expats or intend to be, it makes sense to do something about it.
As an expatriate you can transfer your UK pension into a QROPS, as long as the individual scheme has been accepted as qualifying by HMRC.
Here are some of the benefits:
* Income payments from a QROPS are not normally liable to UK tax, as long as you are not resident for UK tax purposes.
* QROPS can be structured so the income can be paid gross, which is highly beneficial if you live in a jurisdiction with a lower tax than the UK, or no income tax at all.
* Under a QROPS there is no requirement to buy an annuity or maintain a minimum annual income, which gives considerably more flexibility and control of pension investments and how benefits are accessed.
* QROPS investment options are wide ranging and can include international/offshore funds, stocks, bonds currencies and non standard assets such as property and private assets.
* With a QROPS the pension funds can be held in the currency of the country in which you retire, which has the advantage of removing exchange rate risks.
* Up to 30% tax free lump sum can be withdrawn from some QROPS.
* In the UK, when you die the remainder of any annuity would be absorbed by the life insurance company under pooling arrangements or, under the new pension rules, taxed at a rate of 55% by the UK Government. Under QROPS, on death the remainder of the fund will go to your estate as long as you have been non-UK resident for five years or more and there will be no inheritance tax liability.
The HMRC list of qualifying schemes contains hundreds of products and these can be in jurisdictions which may have similar restrictions to the UK when it comes to accessing benefits, or high levels of taxes. To maximise your chance of finding the best scheme for your individual circumstances don’t leave it to chance and a Google search but take the advice of financial adviser qualified to give advice on offshore matters.
Our advisers are all trained to advise on QROPS and we have technical specialists within the company who will undertake a transfer analysis report for any UK pension being moved to ensure it takes into account the UK and the local tax implications of transferring to a QROPS and that it is the best one for you as a client.