For many years, British expatriates and those moving overseas have been faced with difficulties when dealing with UK pensions, as the pension is usually ‘trapped’ back in the UK. One of the main difficulties has been the tax treatment of UK pensions. Until 2008 it was virtually impossible to move a UK pension to an overseas pension without being forced to pay basic rate tax on the transfer. This is no longer an issue.
A QROPS is a Qualifying Recognised Overseas Pension Scheme that is recognised by and has met the criteria as set by Her Majesty’s Revenue & Customs (HMRC). Any QROPS can, therefore, in principle accept a transfer from a UK registered pension scheme.
As of 6 April 2012 HMRC introduced new rules regarding the recognition of QROPS jurisdictions and reporting. The Wealth Practice have reviewed these new rules with our legal representatives and in-house QROPS \ experts and are entirely satisfied we can continue to provide QROPS to expatriates.
There can be huge benefits for expatriates who transfer their UK pensions to a QROPS. However as a QROPS transfer may not be suitable for everyone, you should speak to one of our specialist advisers to discuss your individual needs. Common benefits that clients enjoy include:
- No liability to UK tax on Pension Income
- No requirement to purchase an Annuity or Alternatively Secured Pension
- Ability to leave remaining fund to heirs – no IHT liability
- Payment possible in local currency – no exchange rate risk
- Investment freedom
- No lifetime allowance charge
- Ability to take pension from age 50
- Ability to take larger lump sum from fund (30% versus 25%)
Are there any risks?
Anyone considered to have abused the regulations may be subject to severe tax penalties of 55% of the pension fund for an unauthorized pension transfer on any wealth they still hold in the UK, or on returning to the UK.
Transferring to a QROPS may result in the loss of certain protected rights, including contracted out rights, or guaranteed rights accrued under a defined benefit scheme.
Contact one of our fully qualified advisers today for personal advice on the options available to you.