QROPS

 
 
The rules for transferring a UK pension fund to a QROPS offshore pension are specially written to make sure no tax or other penalties apply.

So, shifting cash from one or more UK pension funds to consolidate the money in a single QROPS pension triggers no tax charges – providing the pensions schemes swapping the money are both registered with the taxman.

The transfer between the schemes is not a contribution, so tax relief is not added to the QROPS or deducted from the funds that are switched.

This is important for many pension savers because it means any contributions in to a UK pension attracted tax relief that increased their retirement savings remains in the fund when transferred out of the UK in to a QROPS pension.

This rule recognises that the contributions already made met the rules for receiving tax relief and the transfer is merely relocating where the funds are held and not a reconsideration of their eligibility for tax relief.

Pension fund transfer values

The value of the transfer fund is part of the annual allowance calculation for the year in which the transfer takes place.

Transfer values are a key point to watch in any pension transfer – whether between UK schemes or offshore.

Anyone contemplating a QROPS transfer should request a transfer value calculation from a UK pension provider before starting the transfer process. This calculation fixes the amount available to move offshore and lays out any charges involved.

In most cases the transfer value will be less that the pension fund value.

QROPS transfers that need careful consideration

In most cases, the transfer fund and the value of any other assets switched in the pension input period are calculated at market value at the date of transfer.

This includes defined benefit schemes, even though the question rarely arises because defined benefit schemes pay index-linked benefits that are lost on a transfer of funds.

A transfer to a QROPS is not generally a benefit crystallisation event for a saver’s lifetime allowance.

Don’t include the UK state pension in any transfer calculations - technically, it’s not a registered pension scheme and only fund switches between registered schemes are allowed.

If you are interested in transfering your UK pension overseas, contact the leading company QROPS.net

 
QROPS 06/05/2009
 
QROPS is a pension scheme which has been created outside of the UK and which is recognised by Her Majesty's Revenue and Customs as meeting certain rules, standards and conditions. A pension scheme having the QROPS approval allows individuals with a UK pension who now resides outside of the UK, or is in the process or planning to leave the UK in the near future, to transfer their UK registered pension offshore to a QROPS Pension Scheme.

To read more about QROPS and the latest update & developments follow this link to another QROPS pension article.

A QROPS pension scheme is predominantly subject to legislation in the jurisdiction where it is based. It is important to note however, that the QROPS administrators have to adhere to HMRC regulations in respect of any member who has been non-UK resident for less than five tax years. After a member of a QROPS has been non-UK resident for over five tax years, this is where the beauty of a QROPS really comes to fruition.

 If an individual had their pension invested in a QROPS based in the Isle of Man, then Isle of Man legislation allows up to 30% of the pension fund to be taken as a lump sum. A QROPS based in Hong Kong only allows lump sum payments to be made at the discretion of the trustees and therefore such payments cannot be guaranteed.

If an individual is invested in a SIPP, then like a QROPS, it is not necessary to have to buy an annuity at the age of 75. After retirement however, and leading up to age 75, a person can go into unsecured pension whereby they can draw an income from the pension fund. However if the member dies during this time and leaves their pension to a chosen beneficiary, then that person can inherit the pension fund as a lump sum but the fund will suffer a 35% income tax charge for the privilege! This compares very unfavourably to a QROPS where a member in the same situation who has been non UK resident for over 5 years, could leave money free of tax to his or her chosen beneficiaries where say the QROPS is based in Hong Kong or Guernsey. If the QROPS was based in the Isle of Man, there would be a 7.5% tax charge on a lump sum payment or a spouse's/dependant's pension could be paid. Still preferable to a 35% income tax charge!

The situation is even more favourable for a member of a QROPS who dies after the age of 75 whilst taking an income and they have been non UK resident for over 5 years. In this situation there would be no tax charge if the QROPS was based in Hong Kong or Guernsey. If the QROPS was based in the Isle of Man, then the fund could be returned less a 7.5% tax charge or a spouse's/dependant's pension could be paid.

If the member’s money was in a UK SIPP and the member had opted to take an ASP , (Alternatively Secured Pension) after 75 years of age, then any of the funds in the ASP still remaining on the death of the member, can be pass onto dependants tax-free. However, transfers to non-dependants will suffer a taxable charge of 70%, in addition of the Inheritance Tax of 40% on amounts over £325,000 starting from the date 6 April 2009.
It is therefore clear that a QROPS can offer many additional benefits over a SIPP. However, no matter how appealing a QROPS may sound, anyone considering transferring their pension abroad should always take advice from a suitably qualified company.  The leading company in QROPS advice is called QROPS.net. To talk to one of their experts follow this link to find more about QROPS