QROPS 2012. Where Offshore Do I Move My UK Pension to Now?
Since HMRC’s decision on April 6th, 2012, the landscape for QROPS has inexorably changed. Hopefully, the new rules will stabilize the industry and reporting requirements have been toughened up to make sure that these QROPS pension transfers are used for their intended purpose, which is still to provide an income for life and avoid double taxation, whilst being outside the UK tax net. QROPS transfers are for UK expats retiring abroad permanently and are not their for quick cash-ins which has hopefully now been stopped.
Providers were aware of ‘condition 4’ which meant that non-residents and residents were taxed at the same rate. Unfortunately, stalwarts of QROPS such as Guernsey and Isle of Man were both punished in this respect and more than 300 Guernsey QROPS were delisted. Many providers were working hard on re-writes to get the new paperwork in to comply with the new QROPS regulations. One poor guy told us how many hours he put in on Christmas day, only for HMRC to reject the Guernsey 157e QROPS fix.
QROPS Pension Transfer 2012. Which Countries Can I Move to Now?
Well, there are quite a few options left. The old Isle of Man QROPS which was written in 1989 are still on the QROPS approved list. The full article can be accessed here. The upshot of this is their Isle of Man 50c QROPS has been delisted.
Anyone who wants to get higher access than the 30% lump sum, can no longer follow the IOM50c route. Fortunately, Brooklands Pensions are offering their ‘Brooklands (NZ) Superannuation Scheme No.1’. This is available to residents and non-resident and is presently one of the only non-KiwiSaver schemes to appear on HMRC’s approved list. KiwiSaver schemes are open to NZ residents only. To see who can join a KiwiSaver QROPS scheme, please see KiwiSaver scheme – who can join. If you are a NZ resident, people can feasibly withdraw all their transferred funds (100% lump sum) at age 65, as long as they joined 5 years earlier.
The Brooklands NZ QROPS scheme only allows 30% as a lump sum, the rest must be used as income for life. This means that you can take 30% as a lump sum plus 100% of any increase in the value of a pension pot. So, let’s say you are 50 and have a £200,000 pot and over the next 10 years it grows at just over 7% per year. In 10 years your pot would be worth circa £400,000. So, you could take all of this increase as a lump sum plus the original 30%. So, you could leave £170,000 to provide you with a pension income for life and pocket £230,000 in cash at 60 years old. You could buy a property with this to retire in abroad and use the rest of your pension as income. You could also use it as spending money or you could re-inves it. The choice is years.
The Malta QROPS is one of the preferred schemes now as it has Double Taxation Agreements (DTAs) with over 60 countries. This means that if you live in Singapore for example, your QROPS is paid gross in Malta, free from UK and Maltese tax. Then you would pay the Singaporean income tax if you redistribute your income to that country for example. In the mean time it would grow free from UK or Maltese income tax whilst it is held in Malta.
For those who are living in countries which do not have a DTA with Malta, then Gibraltar may be an option. They tax residents and non-residents the same rate of tax which is zero.
What is the Safest Option for QROPS Transfers?
Maybe the safest option is to open a multi-juridictional QROPS. Some providers allow for a free transfer between different jurisdictions, so that you can move your pension freely depending on the country you are living in and the tax rules upon drawdown. We can only give advice depending on today’s circumstances. When you get to draw your income it may be another 10, 20 or 30 years time and the tax structures in the different countries will likely have changed. A multi-jurisdictional QROPS may help provide more protection. This is especially true if you are not sure which country overseas you wish to retire in.
For more advice and our free guide, please send an email to:
email@example.comQROPS 2012. Where Offshore Do I Move My UK Pension to Now? by Richard Malpass