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QROPS

QROPS is a "qualifying recognised overseas pension scheme" that has met the criteria laid down by HMRC and is recognised and listed as such. In 2006 ("A" Day) the UK Government dramatically altered UK pension rules allowing for the first time an opportunity for expats or those in the process of exiting the UK to transfer their UK pension into an overseas plan. From that day UK expats were allowed to move their pension away from the UK without tax deduction and with no future UK tax liability. The QROPS landscape has evolved dramatically since "A" Day but pension legislation remains complicated and subject to change. New rules introduced in the UK Spring Budget in 2017 mean that QROPS is no longer a viable option for expats resident outside of the EEA and post Brexit there may be similar issues for EU residents. This means that if you are resident in the EEA it will pay to act swiftly to make sure that all options remain open to you.

The main QROPS centres are Malta and Gibraltar. Malta offers a flexible option similar to the UK. Where a double taxation agreement exists there is no local taxation on income drawn and the QROPS is taxed where the member resides. Income from a Gibraltar QROPS is taxed at source at 2.5% as well as being subject to taxation in the member's country of residence. QROPS can be expensive more so than a SIPP - and many firms add to the cost by holding the pension funds inside a tax wrapper. This is not essential and our preference is to place the funds on an offshore investment platform that is much more cost effective.

UK Budget March 2017

The UK Budget in March 2017 unexpectedly announced a transfer tax of 25% to be imposed on all pension transfers to QROPS unless the member is resident in the EEA or is resident in the same jurisdiction as the QROPS provider. At the moment EEA rules prevent HMRC from taxing movement of capital away from the UK but this might change after Brexit and all pension transfers could be taxed. This would be disappointing as many people prefer to transfer their funds away from the UK to ensure they do not suffer unnecessary currency exposure and to avoid the risk of any adverse changes in UK pensions' legislation which might affect their pension entitlement or tax position. If you are considering moving your pension you need to act now before it is too late. This is particularly important if your current pension fund is close to the Lifetime Allowance threshold of £1M.

How Does UK Pensions Freedom Affect QROPS?

UK pension rules changed dramatically from April 6th 2015. If you are aged 55 or over and have a Money Purchase Pension Scheme {Defined Contribution) you will be able to access all or as much of your pension fund as you require at anytime. Malta has followed suit and allows full flexibility within their scheme rules as well. Of course flexibility usually comes at a price and any benefits that you access in the UK over and above a 25% tax free lump sum will be taxed at your highest marginal rate.

The tax you pay when you move your pension to QROPS will depend on where you pay your taxes. Our retirement planning specialists will be able to guide you in respect of the tax due on your QROPS income when they know where you are going to be resident.

In our experience we know that you will have accumulated your pension fund in order that it will provide for your income needs in later life. Careful planning is needed to ensure that your fund will survive as long as you do and hopefully there might be something left over for your dependents.

Can I Move a Final Salary Scheme Into a QROPS

es you can although whether that will be the best advice for you will depend on many factors. Of course, pensions freedom, mentioned earlier, will provide a lot more flexibility than a final salary pension scheme ever can but whereas a final salary scheme will provide guaranteed benefits the return from all other pensions depend on the performance of the underlying investments. In many cases, but not all, the guarantees offered may well outweigh flexibility. As part of the expert pension review process we offer, one of our pension specialists will thoroughly investigate the benefits offered by your final salary arrangement and compare these with an appropriate QROPS option to make sure that the right decision is made for you.

Can I Consolidate a Number of UK Pensions?

Yes, it is possible to bring together all of your existing pension arrangements (except for state benefits) and hold them together in one QROPS. This will simplify your pension arrangements and allow you to draw retirement income from just one source.

Can I Consolidate UK Pensions Without The Need For QROPS?

Yes, if we agree that QROPS is not the most suitable vehicle for your pension funds then we can put all of your existing UK pension funds into one scheme within the UK.

Can I Avoid The New Death Tax Charge by Switching to QROPS?

New rules mean that if you die after the age of 75 your beneficiaries could pay tax of up to 45% before receiving the remainder of your fund. If you move your pension fund to a QROPS then after ten complete tax years outside of the UK this rule will no longer apply and your chosen beneficiaries can receive all of your remaining fund without suffering this UK tax liability.

Will The New Lifetime Allowance Apply if I Move to QROPS?

Successive UK governments have reduced the lifetime allowance which now stands at £1M (any fund amount over this figure is subject to a penalty tax). If you move your fund to a QROPS this penalty charge will no longer apply. This could be of major benefit to anyone whose fund is close to the £1M threshold.

To speak directly to a pensions adviser or for further information Tel: 951 319 727 or email wealth@fiduciarywealth.eu

 

 

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