QROPS Specialists Notes for 2015/16
The QROPS world has changed every year since launch. Each government and treasury has brought in different measures that have affected how QROPS have been administered.
Over the years, QROPS under older rules in Singapore, Hong Kong, the Guernsey 157A QROPS, the Isle of Man 50c QROPS, Qatar, Ireland, Canada, Australia, Switzerland and Kiwisaver QROPS schemes have all been closed.
Pension transfers from unfunded pension final salary schemes, also known as defined benefit pension schemes, have also been closed to QROPS transfers. Teachers, policeman, firefighters, civil servants and NHS staff can now no longer transfer their pensions offshore.
Those that were lucky enough to be locked into older rules may pay no tax on their QROPS.
Under the new ROPS rules, Hong Kong, Malta and Gibraltar have become the most prominent new QROPS destinations with the Isle of Man and New Zealand still attracting large volumes.
If you move a pension today, it will likely be “grandfathered” under today’s tax clauses. Every April, the tax system changes and HMRC don’t retrospectively change tax rules. So, pensioners who want today’s pension rules should transfer as soon as possible, especially as it takes 3 – 6 months to transfer to a QROPS.
As the rules are changed each year and there are hundreds of articles on the site, please refer to the date of each post, as they will be out of date as soon as they are written. We are striving to update each post to keep up with the latest rules and tax rates, but it just isn’t possible to keep up-to-date with hundreds of countries and rules to deal with that are constantly changing. Please email us if you spot any out of date material and we will attend to it as soon as we can.
The old rules for UK pension schemes meant that you were forced to buy an annuity and there was a 55% tax on death. Also, you were only allowed 100% of GAD rates when taking a pension.
These rules have now been removed as HMRC have done a U-turn and the UK now allows full flexibility: tax on death is zero until after age 75 and then the death tax may be up to 45%; the personal allowance in the UK has increased up to 11,000 GBP; but income tax can be 20% – 45% and an emergency tax code” can be placed if you try to cash-in your pension meaning you pay the highest rate of tax that year and have to reclaim the tax back.
A QROPS can significantly reduce income tax to 2.5% or even 0% in some circumstances, but you need to speak to an international tax expert. Tax on death in most QROPS jurisdictions is zero (with the notable exception of the Isle of Man who charge 7.5% tax on death). However, an examination of the intricacies of the international tax treaties must be looked into. Income tax may be similar to what you pay in the UK and in some cases, if your financial adviser chooses the wrong QROPS, you may pay more tax than in the UK. Although, this is the exception rather than the rule.
QROPS Specialists work alongside a lot of international technical advisers in the pensions arena and will look into the Double Taxation Agreements for clients, however, we are not international tax attorneys and if you want final verdict on tax, you need to seek advice from a tax attorney in your country of residence at retirement. Please, also bear in mind that tax rates may increase or decrease in your country of retirement between now and retirement.
The information contained herein is for informational purposes only. QROPS Specialists does not provide legal or tax advice. The information expressed is educational in nature, is not individualized, and should not be considered legal or tax advice, a forecast or guarantee of future results, investment recommendations, or an offer to buy or sell securities by QROPS Specialists. The tax efficiency strategies discussed should not be interpreted as tax advice and it does not represent in any manner that the tax consequences detailed will be obtained. Tax laws and regulations are complex and subject to change, and the contents herein may not be updated on a real-time basis to reflect changes to the tax laws. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Laws of a particular country or state or jurisdiction or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information contained herein. Clients should consult with their personal tax advisers regarding their specific situations and the tax consequences of investing in particular types of investments or through different types of retirement accounts. QROPS Specialists makes no warranties with regard to the information herein or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.