Qualifying Non-UK Pension Schemes (QNUPS) were introduced in February this year. They came about through amendments to the Inheritance Tax Act, which made provision for certain offshore pensions to be Inheritance Tax (IHT) exempt.
Why use a QNUPS?
QNUPS are a great planning tool and can be used by both UK residents and ex-pats.
QNUPS for ex-pats.
Any ex-pat with a Qualifying Recognised Overseas Pension Scheme (QROPS) that has been outside of the UK for more than 5 complete tax years should seriously think about transferring into a QNUPS. The reason for doing so is if they were to go back to the UK with a QROPS, they would immediately fall under the UK pensions regime again. This would result in restriction on drawdown amounts, ever changing legislation and perhaps most importantly – death taxes. Unlike a UK registered pension scheme a QNUPS is not reportable to HMRC.
If the member moves back to the UK, they can continue to enjoy the flexible drawdown options, virtually limitless investment choice and all with the security that the funds within the plan are exempt from IHT, will not be liable to the usual UK registered pension scheme death taxes and can be left to a beneficiary of choice.
QNUPS for UK residents.
With the recently announced changes to pension tax relief, now may be a great time for UK resident clients to start thinking about alternative pension arrangements. From next year (April 2011) the maximum that anyone can regularly contribute to a UK registered pension will be £50,000 per annum – a massive reduction from the current £255,000. On top of this the amount that any person can contribute to a UK registered pension scheme without penalty, the lifetime allowance, will be reduced from the current £1.8m to £1.5m in April 2012. Anyone that is likely to breach either of these rulings can establish a QNUPS.
A UK resident client cannot receive tax relief when contributing to a QNUPS so they are certainly not suitable for anyone except those who are prevented from investing in registered pension schemes. QNUPS can provide a valuable tool for additional pension provision and succession planning and the same benefits apply to UK resident clients as to ex-pats.
So whether you are onshore or offshore you can receive the following benefits from a QNUPS:
- No limit on the amount that can be contributed
- Virtually no restrictions on investments
- Can invest in residential property
- Very flexible drawdown options
- No Inheritance Tax
- No UK pension death taxes
- Leave any unused funds to beneficiaries of your choice
- Income paid gross from Guernsey
- Standard retirement from 55, possibly earlier
- Up to 25% Pension Commencement Lump Sum
- No requirement to purchase an annuity
- Tax efficiency: no tax on the pension assets within the plan
- Up to 25% can be loaned to the member prior to drawdown
- Ability to continue making contributions once drawdown has commenced
- No trustee reporting to HMRC
Listed above are the main benefits of a QNUPS but it is important to remember that they are truly bespoke plans and the flexibility afforded by such plans is very difficult to cover off in a simple article. If you believe that a QNUPS might be the right tool for you ask your financial planner for a full review of your pension and succession provision.
Marlborough Pension Trustees Limited