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QROPS
- Qualifying Recognised Overseas Pension Schemes
In 2006, it was
announced that those with UK pension benefits that were
intending to retire outside the UK would be allowed to move their
pension benefits to a Qualifying Recognised Overseas
Pension Scheme (QROPS) with the Revenue's approval.
Over the past few years there has been
much confusion over how pension benefits can be
withdrawn from a QROPS and the
final details of this have only just become clear.
The rules of the scheme must be
broadly equivalent in terms of treatment, to a UK
registered pension scheme and the QROPS trustee must
provide Her Majesty’s Revenue & Customs (HMRC) with
information on certain “events”.
What is a QROPS?
A QROPS
is a
recognised
overseas pension scheme
that meets certain requirements.
The rules of the scheme must
be broadly equivalent in terms of tax treatment, to a UK
registered pension scheme and the scheme manager must
provide HMRC with
information on certain 'events'.
How are QROPS structured?
A QROPS is structured in a similar manner
to a UK pension; i.e. there is an investment vehicle which
is owned on your behalf by a pension administrator (the trustees).
The trustees must be based outside the UK and approved
by HMRC as a QROPS administrator. However, the trustees
do not have to be in the country that the pension holder retires to allowing
them to select the jurisdiction with the best legislation and tax-efficiency for
their personal circumstances.
Through the investment vehicle the pension holder
can usually access a wide range of cash, bond, property, hedge,
equity and commodity funds - and switch between these
funds as market conditions change.
What are the benefits of
a QROPS?
A QROPS usually removes the
compulsion of having to purchase a UK annuity. Annuities
are extremely unpopular in the UK with both pensioners
and the press because they are extremely poor value and
(except in very few circumstances) never return what the
pension has had to invest. On top of this, the income is
taxed in the UK even if the individual is not resident
(or even domiciled) there.
Instead of an annuity, the Member can continue to
draw down an income for the whole of their life. This
income can usually be up to 120% of Government Actuarial
Table figures and is not set at outside; meaning the
Member can receive more income if interest rates
increase.
If the QROPS is established in a
tax-efficient jurisdiction, any income drawn from the
QROPS will also be free of income tax in country where
the income is being drawn from. For many expatriates,
this means a tax-free retirement income - and
potentially a net
income of nearly double what they would have received if
they left the pension in the UK!
Additionally,
on the Members’ death, the residual value of the pension
benefits passes to their loved ones rather than the
annuity provider. In the UK, the family receives nothing
on death once the annuity is purchased – even if this is
the day after the annuity is purchased and nothing has
been drawn out. Understandably, this is deemed by many
to be highly unfair as, ultimately, this is money the
individual has saved.
Who can move their pension into a QROPS?
Anyone who has is living outside the UK (or shortly moving overseas) and has a UK 'onshore' pension scheme.
As such, this scheme applies as much to Australians, New
Zealanders and South Africans (and any other nationality)
who have worked in the UK as to British expatriates.
How do I
know this is a Legitimate Scheme?
Details of the
QROPS can be found on the
HMRC Website. Less complicated
summaries can be found on the websites of the
Pensions
Advisory Service and
Scottish Life.
A list of the recognised pension
administrators is also on the HMRC website which
includes all the administrators Candour Consultancy
recommend.
My pension has a large proportion of
Protected Rights - can I move these into a QROPS?
Technically, yes. However, in many circumstances
it may not be advisable to. Protected Rights often have
far more favourable terms than standard pension benefits
so we would strongly recommend speaking to us before transferring
protected rights. If an individual does decide to transfer
protected rights, disclaimers will need to be signed to
confirm the policyholder understand the potential implications.
When can I take the pension benefits?
Technically, you can take the benefits
from the day of transfer. However, virtually all of the
investment vehicles will have a minimum term of 5 years
(unless you have less than 5 years to retirement). It is
important to point out at this point that the money being
transferred has been set aside for your retirement and we
would strongly recommend leaving the money in the QROPS until
you reach retirement.
What is the minimum transfer I can make
into a QROPS?
There is no minimum level. However, it
may not be efficient to transfer a single smaller pension
into a QROPS. Candour Consultancy can advise on the most
efficient vehicle based on the size of your pension 'pot'
and the length of time you have until you retire.
Can I make additional contributions to
my QROPS?
Yes - depending on the investment vehicle
being transferred into.
Is there any Taxation on the Transfer?
A transfer of a registered pension scheme
to a QROPS is a Benefit Crystallisation Event (BCE). This
means it will give rise to an additional income tax charge
where the transfer exceeds the individual's lifetime allowance.
Currently, this allowance is set at £1,650,000.
Anyone with a pension fund larger than
£1,650,000 who is contemplating such a transfer should obtain
specialist advice from Candour Consultancy before proceeding.
My UK pension is IHT protected - is a
QROPS?
In the Pre-Budget
Report delivered by the Chancellor of the Exchequer on 9
October 2007, it was announced that IHT "protection" is
to be extended to UK tax relieved pension's savings held
in overseas pension schemes. The change was backdated
to have effect from 6 April 2006 so all QROPS
transfers are protected from UK death taxes.
However, depending on the jurisdiction you transfer
your pension benefits to, there may be death taxes
payable elsewhere.
Can I Return to the UK after
taking the benefits?
Yes, you can return without prejudice.
However, to ensure there is no taxable event, we would recommend
staying offshore until the next tax year begins.
What happens if I return
to the UK before taking the benefits?
The QROPS administrator will have
to report this 'event' to HMRC and the pension scheme will become
subject to UK pension regulations again. If the
administrator does not do so, they will lose their
approved status - if you do not inform the
administrator, you are breaking the law.
I am interested in transferring
my UK pension to a QROPS - What do I do next?
Candour Consultancy was one of the first
to be able to offer QROPS to expatriates in the Middle East
and have built up strong relationships with the main
QROPS providers.
We have teamed up with one of the worlds largest financial
institutions, and one of the most respected providers of QROPS
administration, to offer safe, quick and easy transfer of
pension benefits. We can often obtain discounts on
published transfer fee rates.
Candour Consultancy
can arrange transfers from UK pension schemes to QROPS
regardless of where the policyholder resides in the
world.
For impartial advice on whether it would
be in your best interests to transfer your pension benefits
overseas,
just
click here
to provide us with your preferred contact details.
Candour Consultancy do
not charge for providing the pension transfer analysis
and there is no obligation to proceed. Any transfer of
pension benefits would be directly from your existing
pension provider to the QROPS provider. |
