Table Of Contents
- Asset Questions
- Questions About Costs
- Implications For Your QROPS If You Move Country
- Qualifying For A QROPS
- Who Qualifies For A QROPS?
- I’m A UK Tax Resident, Can I Apply?
- Can I Transfer My Retirement Plan If I Am A US Citizen?
- Is A Transfer Available To Other Nationalities?
- If I Have Taken An Annuity Can I Transfer To A QROPS?
- If I Have Taken A Payment On A Final Salary Scheme Can I Transfer To A QROPS?
- Can I Transfer A State Pension?
- Are There Minimum And Maximum Transfer Values?
- QROPS Tax Implications
- The Relationship Between HMRC And QROPS
- General Questions
- What To Look For When Considering A Transfer
We are here to answer your pension questions, if you have a question that hasn’t been answered below please get in touch with us and we’ll do our best to give you an answer.
Do I Need To Liquidate Assets In My UK Registered Pension Scheme Before Transferring?
- This is one of the more common pension questions that we get asked and would depend on the scheme itself, if the current pension scheme is a SIPP or a SSAS, it may be possible to transfer the existing assets.
- For most other pension schemes you will need to liquidate your assets before transfer.
Can I Purchase Residential Property?
- Yes, but if you have been a UK resident at any time in the last five tax years you liable to a 70% tax charge of the asset value. If you have not been resident in the UK for the last 5 tax years, then the operation and taxation is subject to the legislation associated with the jurisdiction where the scheme is based.
- Some QROPS jurisdictions allow investment into residential property with a fund, although usually this will be only permitted through indirect ownership, through a corporate structure or property fund.
- Pension questions around property investment are best addressed with an advisor who understands your specific needs.
How Are Assets Transferred Upon Death?
A member has sole entitlement to the benefits available from their plan during their lifetime. After death, any residual value goes to the named beneficiaries.
Will A Transfer Accept Transfer Of A Protected Rights Fund?
- Yes, provided that the QROPS pension plan is willing to accept it.
- Form CA 1881 needs to be completed as this enables HMRC to keep track of where the protected rights are. If you are transferring your protected rights it is necessary to state that you understand that all protection associated with UK pensions legislation is being given up.
Questions About Costs
What Are The Costs Associated With A Pension Transfer?
Each scheme has its own charges which depend upon various factors, when deciding on a particular scheme consider the benefits and flexibility offered.
There are generally three costs in most QROPS schemes:
- Setup costs.
- Annual management charge.
- Underlying fund management.
What Is The Minimum Value I Can Transfer?
The minimum transfer amount into a QROPS is £25 000, a number of your pensions can be combined into one in order to reach this figure.
Do I Have to Purchase an Annuity?
- However, if your QROPS is correctly setup, you can if you wish to, a well established scheme offers superior investment flexibility.
Find Out More About QROPS
Implications For Your QROPS If You Move Country
What Will Happen If I Made A Transfer And Return To The UK Within 5 Tax Years?
- If you are returning for holiday and are still a non-tax resident then everything is as usual with QROPS.
- If you are returning to the UK to work within 5 tax years you will need to report your QROPS to the HMRC, it can remain offshore but it will fall under UK rules and regulations.
- Pension questions around domicile status are technical and therefore best discussed with your financial advisor.
What Happens If I Move?
No matter where you move in the world, your QROPS plan stays in the offshore jurisdiction that you have chosen.
Qualifying For A QROPS
Who Qualifies For A QROPS?
In order to qualify, the following conditions must be met:
- Have a British pension.
- Have been living as an expatriate or have intentions to expatriate from the UK within the following year.
- Have been a non-tax resident for 5 years (either with plans to live outside the UK for 5 years or have already been out of the UK for 5 years).
- Must have a private pension (it is not available to state pension holders).
- No benefits or annuities must have been drawn from the pension.
I’m A UK Tax Resident, Can I Apply?
Yes, provided that you have the intention of becoming a non-UK tax resident within 12 months.
Can I Transfer My Retirement Plan If I Am A US Citizen?
- It is a complex process for US citizens, as many US based IRA’s are not permitted to receive funds from a UK registered scheme.
- An easier option would be to establish a QROPS outside of the US in a suitable tax efficient jurisdiction.
Is A Transfer Available To Other Nationalities?
The majority of the schemes are not available to US nationals although other nationalities may apply.
If I Have Taken An Annuity Can I Transfer To A QROPS?
If I Have Taken A Payment On A Final Salary Scheme Can I Transfer To A QROPS?
Can I Transfer A State Pension?
Unfortunately no, state pensions are not transferrable.
Are There Minimum And Maximum Transfer Values?
- Minimum transfer value of £25 000.
- There is no maximum limit.
QROPS Tax Implications
Is My Plan Subject To EU Savings Tax Directive?
Do I Also Need To Declare Payments During The First 5 Tax Years Of A Transfer Scheme?
- Yes, you must fill out a self-assessment return (available from HMRC) and declare any payments, withdrawals or transfers made.
- Your completed form should be returned to the tax office that is currently dealing with your affairs, or that which was dealing with your affairs before you left the UK.
What Are The Tax Implications?
Transferring to a QROPS is a Benefit Crystallization event and is not taxed unless it exceeds an individual’s lifetime allowance.
How Will Benefits Or Withdrawals Be Taxed After The Initial Period?
You will be subject to any taxation on such payments that are due in your country of residence at the time. Depending on where you are a tax resident of at the time, there are schemes that achieve a minimal tax rate, often there will be no tax deducted at source from payments that are made from the scheme. It is best to discuss these pension questions with an adviser who will be able to offer specific information where you are tax resident.
The Relationship Between HMRC And QROPS
Does The HMRC Require The Fund To Report Payments?
An HMRC requirement is that all providers notify them of any payments from transferred pensions for the relevant member, unless the member is resident in the UK when payment is made.
Will The Scheme Declare Any Payments To The HMRC?
- During the first 5 tax years, the trustee is required to let the HMRC know of any movements made from the structure, including payments, withdrawals, or transfers.
- After 5 years, the trustee is no longer required to let the HMRC know of any payments, withdrawals, or transfers made. Pension questions that may be asked by the HMRC include payment information, but generally this is only applicable for the first 5 years.
Why Are There So Many Regulations & Restrictions Governing Pension?
- To protect tax revenues of the British government.
- To prevent pensioners from accessing all their funds in the first few years and then relying on the state for the balance of their retirement years.
What Is A QROPS?
- A QROPS is a Qualifying Recognised Overseas Pension Scheme.
- It is the transfer of assets held within a traditional UK Pension Scheme into a QROPS.
- It is a scheme set up outside the UK that must be regulated as a pension scheme in the country in which it is established.
- It is an HMRC approved pension scheme held in an offshore jurisdiction offering tax relief and increased control over the member’s assets.
- It should be viewed as an asset. While it is in a UK scheme, although it is “your asset” there are certain restrictions, obligations and implications that apply. These restrictions are legislative or were in the fine print when you took out the pension and will have a large financial impact at some point.
When Was QROPS Introduced?
- Due to European precedent in allowing transferability, in April 2006 the UK HMRC introduced the option for individuals meeting certain requirements. This was in response to EU pension questions around flexibility for citizens.
While “your asset” is held in the UK by the pension group, it is subject to various regulations and limitations.
- A QROPS pension release allows you to transfer this “asset” into a different HMRC approved scheme in a jurisdiction outside the UK. This offshore HMRC approved scheme will still be under UK rules and reporting requirements unless you have been a non-resident for 5 tax years, at which point the scheme is no longer required to report to HMRC.
When you have been a non-tax resident for over 5 years, you obviously have greater flexibility and many of the limiting restrictions and obligations will no longer apply.
How Long Does A Transfer Take?
A transfer can take anything from a few weeks to a few months.
What Will Happen To My Pension Upon My Death?
Most schemes ensure that all remaining assets upon your death are distributed to designated beneficiaries. Options available upon death that your QROPS could include are:
- Annuity to named beneficiaries.
- Transfer of the proceeds of your scheme to a new plan for the designated beneficiaries.
- Holding of your plan in trust for distribution at a future date.
- Winding up of your plan for payment into your estate
- Winding up of your plan and payment directly to designated beneficiaries.
- You should be able to amend your succession instructions.
- As annuities are not purchased from life assurance companies, upon on death the remaining assets are returned to your plan and distributed according to your wishes.
At What Age Can Benefit Be Taken?
- Benefit can be taken on “normal retirement date”.
- Normal retirement date is not less than 50 or older than age 75.
There are many pension benefits you can take advantage of. Make sure you are informed.
Can I Do A QROPS Pension Transfer Myself?
No. Only appointed intermediaries are permitted.
If I Transfer My UK Pension, Can I Access My Fund As A 100% Lump Sum?
No. Schemes and advisers which offer 100% lump sum withdrawals are being shut down by the HMRC with members being levied high surcharges and penalties for this.
What To Look For When Considering A Transfer
Which Jurisdiction Should You Select?
- It must be a tax-efficient and secure jurisdiction.
- It should also have strong investor ethics as in the UK.
- The jurisdiction should offer a substantial improvement in investment and benefit options available (some jurisdictions place restrictions on the funds you can access).
- Ask pension questions that will get you what you need as each individual will have different preferences.
What Investment Flexibility Does It Offer? (Can I Manage My Own QROPS Assets?)
- One of the major benefits is investment flexibility and choice.
- The best schemes offer greater flexibility and a degree of choice. Some schemes allow you to manage the assets with complete freedom, while others have certain restrictions.
What Are The Key Factors Of A Good QROPS?
A QROPS offers a number of benefits to the member including:
- Tax efficiency
- Well established and secure jurisdiction
- Investment Flexibility
- Transparent Charges
What Are The Key Benefits Of A Good QROPS?
- No necessity to take an annuity or pay a UK tax charge upon death.
- All unused funds can be left to your beneficiaries.
- Can choose beneficiaries, leave entire estate to them.
- Tax free lump sum of up to 30%.
- Greater investment flexibility and access to global funds with higher returns.
- Income is more tax efficient, with income and benefits in the currency of your choice.
- Greater confidentiality.
- Protection against possible future creditors (depending on jurisdiction).
If you have specific questions on QROPS BREXIT, please have a read through the article that we have prepared on the topic, for more on BREXIT or if you have any other pension questions, please get in touch with us.