Those reviewing what to do with their accrued UK pension benefits, usually have the following three options:
- Leave your UK pension benefits where they are.
- Transfer into a UK Self-Invested Personal Pension (SIPP), the name given to the type of UK Government approved personal pension scheme. You may transfer to a SIPP in your own name, especially if you are planning to retire to the UK.
- Transfer into a Qualifying Recognised Overseas Pension Scheme (QROPS), which is an overseas pension scheme that meets certain requirements set by Her Majesty’s Revenue and Customs. You may transfer to a QROPS in your own name, if you feel that you are likely to remain offshore permanently.
From April 2006, under the so-called Pension simplification rules, you can transfer your accrued UK personal or occupational pension benefits into a tax efficient jurisdiction.
Whilst the rules require the QROPS trustee to report to the HMRC certain events until 10 years from the transfer, the following are key considerations.
Why should I consider a QROPS?
Leaving your pension in the UK attracts UK levels of taxes and charges. By comparison QROPS offers the following benefits:
- You can consolidate multiple UK schemes into one for simpler reporting, servicing and, most likely, reduced costs.
- You can access your pension funds from age 55.
- Potentially greatly reduced income tax liability when taking your pension income.
- Take income and benefits in the currency of your choice.
- Tax efficient access to up to 100% of your pension fund. 30% is available tax-free, with the balance subject to your resident jurisdiction’s calculations (usually much lower than UK taxes).
- Greater investment choice than UK schemes.
- No death charge for those who exceed 5 full UK tax years as a UK non-resident. This provides certainty that the unused fund can be transferred to your loved ones. The UK will charge 45% on the unused fund owned by individuals who pass away from the age of 75.
- UK “Lifetime Allowance” does not apply. Avoid tax recovery charge of probably 55% or more, on the amount of a pension fund that exceeds GBP 1.25 million. This threshold will reduce further to GBP 1 million (from April 2016).
- Many UK schemes have hidden charges, so the actual cost of your pension is rarely known. QROPS are fully transparent; you’ll know exactly what the charges are.
Which jurisdiction for QROPS?
The QROPS jurisdiction we recommend will vary depending on your individual requirements. However, due to recent developments, we usually recommend Australia, Malta or Gibraltar.
If you speak with one of ICC’s wealth managers, you are guaranteed impartial and confidential advice. They are experts in pension transfers. This is important. The rules can be complex, and there are many QROPS and SIPP providers. Careful due diligence is needed to decide which one is the most suitable for your individual needs.
Pension requirements are usually only a part of your overall financial planning needs. Our Wealth Managers will consider your overall circumstances to give appropriate recommendation as to what to do.
Contact us to arrange an obligation free meeting and understand:
- How can I save on my UK taxes
- How can I pass my unused pension fund to my loved ones
- What types of pension can I transfer to QROPS
- What are the risks of transferring my pension
- How can I benefit from greater investment and currency choice (for QROPS)
- Will the UK Lifetime Allowance effect me