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UK Pension Transfers to QROPS for Danish Residents

If you are Danish and have worked for many years and built up a substantial pension in the UK or if you are a British expat who is moving to retire in Denmark or elsewhere outside the UK, you should look into the options of transferring your UK pension to a QROPS for tax & currency efficiency.

UK pensions face up to 45% income tax in the UK and also up to 45% tax on death on any cash lump sum left for inheritors. Danish income tax is one of the highest in Europe and is tiered up to 51.95%.

But, by smart pension planning, you can move your UK pension to a destination where your pension is not taxed on growth or death. A pension left in the UK would face up to 45% tax on death after the age of 75. Seeing as the life expectancy of men and women are 84 for men and 87 for women with today’s medicine, most pensioners are going to fall into this category.

Unfortunately, there is no QROPS jurisdiction which can avoid Danish income taxes, but you can transfer your pension to a QROPS in Malta, New Zealand and Hong to avoid UK taxes. The only tax would be the tax on drawing benefits in Denmark. Is there a way to avoid Danish income taxes all together? Yes, by retiring in a different country. But, if you retire in Denmark, you will pay Danish income taxes on retirement benefits that are drawn.


Danish Income Taxes

You can find the latest Danish income taxes at the Skatteministeriet. There are local taxes, church taxes and taxes on earned income and healthcare contributions. The maximum tax ceiling is 51.95%.

The only way to avoid Danish income taxes is to retire abroad. If you are working in Denmark and have a UK pension, you could transfer your pension to Malta, New Zealand or Hong Kong, whilst retiring abroad in Asia or the Caribbean for example to avoid UK and Danish taxes.

Tax on Death of a UK Pension for Danish Residents

Once your pension has been moved to a QROPS, there is no tax on death as long as the pension monies remain wrapped in a QROPS. A pension cashed in the UK would face up to 40% UK IHT. If a pension isn’t cashed in, but it remains in the UK, taxes on income will be up to 45% and tax on death after 75 is up to 45% if left as a cash lump sum. A QROPS moves the pension out of the UK tax net, so your spouse or named beneficiaries would receive the entire pension pot as a cash lump sum.

Please contact us to find out more about the latest QROPS options.

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