UK Pension Transfers to QROPS for British Expats Resident in the Netherlands and Dutch Expats Returning from the UK
QROPS Netherlands – British expats who are resident in the Netherlands or wishing to retire in the Netherlands should consider what to do with their existing pensions which are sitting in the UK and still taxable in the UK despite being an expat in Holland.
“British expats resident in the Netherlands can avoid a 45% lump sum tax upon death and income taxes of up to 45% in the UK through a pension transfer to a QROPS. Plus, they would have control over where they invest their hard earned pension monies”
British expatriates resident in the Netherlands can transfer their existing pension(s) into a Qualifying Recognized Overseas Pension Scheme (QROPS) in order to avoid UK taxation on their existing pensions and to get their pension into a tax efficient country in the EU.
“Dutch expats who have worked in the UK can also transfer their UK private pensions offshore to avoid taxes in the UK.”
British expats living or working in The Netherlands or wishing to (retire in Holland) can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like Malta which is in the EU and has a Double Taxation Agreement with the Netherlands. Malta allows full pension flexibility if you want full access to your pension monies. Alternatively, if you want a tax optimal solution, clients can transfer their UK pensions to Hong Kong as the HK-Netherlands DTA gives taxation rights to HK which means zero income tax in HK and no income tax in the Netherlands.
Transfer a UK Pension to a QROPS in Hong Kong for a Resident in the Netherlands
You can transfer a UK pension to Hong Kong to get it outside the UK tax net. Once in a HK ROPS, you avoid all UK taxation as long as you remain tax resident outside the UK.
Tax on income, growth and death is also zero in Hong Kong as long as you remain tax resident outside of Hong Kong.
So, what about tax in the Netherlands? Well, this is covers under Article 17 which clearly gives the taxation rights to Hong Kong. So, a UK pension transfer to HK avoids tax in the UK, HK and the Netherlands.
Pensions, Annuities, Social Security Payments, Alimony And Maintenance Payments
1. Subject to the provisions of paragraph 2 of Article 18, pensions and other similar remuneration
(including a lump sum payment) in consideration of past employment or self-employment, and
annuities (including a lump sum payment), arising in a Contracting Party and paid to a resident
of the other Contracting Party may be taxed in the first-mentioned Contracting Party.
2. Pensions and other payments paid out under the social security legislation of a Contracting
Party to a resident of the other Contracting Party may be taxed in the first-mentioned Contracting
3. Pensions and other similar remuneration (including a lump sum payment) and annuities
(including a lump sum payment) shall be deemed to arise in a Contracting Party:
(a) in the case of the Netherlands, insofar as the contributions or payments associated with the
pensions, other similar remuneration or annuities, or the entitlements received from them qualified
for relief from tax in the Netherlands;
(b) in the case of the Hong Kong Special Administrative Region, if paid out of a pension scheme
where such pension scheme is recognised for tax purposes or regulated in accordance with the
laws of the Hong Kong Special Administrative Region.
The transfer of a pension or other similar remuneration, or an annuity from a pension fund or an
insurance company in a Contracting Party to a pension fund or an insurance company in any
place outside that Contracting Party shall not restrict in any way the taxing rights of the firstmentioned
Contracting Party under this Article.
4. The term “annuity” means a stated sum payable periodically at stated times during life or during
a specified or ascertainable period of time under an obligation to make the payments in return for
adequate and full consideration in money or money’s worth.
5. For the purposes of this Article in the case of the Hong Kong Special Administrative Region,
(a) a pension scheme means an arrangement in which individuals may participate in order to
secure retirement benefits, and
(b) a pension scheme is recognised for tax purposes if contributions to the scheme qualify for tax
6. Periodic payments, made pursuant to a written separation agreement or a decree of divorce,
separation maintenance, or compulsory support, including payments for the support of a child, as
well as lump sum payments in lieu thereof, paid by a resident of a Contracting Party to a resident
of the other Contracting Party, shall not be taxable in either Contracting Party if the payer is not
entitled in the first-mentioned Contracting Party to deduction from tax for any such payments.
However, if the payer is entitled in the first-mentioned Contracting Party to deduction from tax for
any such payments, such payments may be taxed in either Contracting Party.
Thus, a UK pension transfer to Hong Kong is the tax optimal solution if you want to pay the least tax on your pension pot from a ROPS perspective.
However, if you want access to your entire pension pot after 55, only Malta allows full flexibility. Hong Kong only allows a 25% tax-free cash lump sum and the rest must pay an income for life.
Transfer a UK Pension to a QROPS in Malta for a Resident in the Netherlands
Why transfer a UK Pension to Malta for residents in the Netherlands?
- Avoids all tax on growth of your pension fund
- Avoids any tax on death
- You only pay Dutch income tax on your retirement benefits
- You have full flexible access to your funds after 55 years of age
- 100% of your pension goes to whomever you nominate upon death whereas under a Dutch pension, the pension would cease with death of partner and not passed on to children. A QROPS ensures that cash is paid out as a lump sum to partner or children
- You can consolidate all your pensions in one place
- You can leave in GBP or transfer your pension to EUR or another currency
- Greater investment choice. You can invest in the mutual funds, shares or ETFs of your choosing
What is the Pension Transfer Process for a British Expat Resident in Holland?
A Qualifying Recognized Overseas Pension Scheme (QROPS) allows your pension to reside outside the UK tax net. For British residents in Holland, we recommend a pension transfer to a QROPS in Malta which has a Double Taxation Agreement with the UK. That means that your pension grows tax-free and there is no tax upon death. It also means that, unlike a Dutch pension, 100% of your pension pot can be passed on to any beneficiaries you like upon death as a cash lump sum.
You can take a 25% lump sum at 55. You also have full flexible drawdown available, you just pay Dutch taxes.
If you are living in The Netherlands at the moment, you can take advantage of your offshore address in order to move your UK pension into a QROPS to avoid further UK taxes down the line. A QROPS is an appropriate legal vehicle to avoid UK taxes if you are considering living or retiring in the Netherlands or abroad.
The transfer process takes about 3 months after receiving the application form. QROPS Specialists can fill out all the forms on your behalf. Your UK pension gets transferred to Hong Kong or Malta to the pension trustees. Your pension monies are then re-invested into the unit trusts, mutual funds or ETFs you want. Normally this is invested in a wrapper or held on a platform.
Can I Transfer a Dutch Pension to a QROPS as Well as My UK Pension?
There are several requirements that must be met in order for any transfer of your Dutch pension funds to be considered. You will usually need to be in current employment in your county of residence and will need to provide a copy of your employment contract. We will then complete the required forms and submit them to the Dutch Tax Authorities for confirmation that the transfer can take place.
In addition certain criteria have to be met each year for the first 10 years after your pension fund has been transferred out of Holland. These include a reporting requirement to the Dutch Tax Authorities of any payments made during this time and advising them if the pension funds are for some reason transferred to another scheme.
Also, during the first 10 years, no “lump sum” can be taken from the QROPS which has been transferred from a Dutch pension scheme. You can however, take up to 25% lump sum of any funds transferred from a UK scheme.
Dutch Expats Returning from the UK to the Netherlands
“In most Dutch schemes, when the last remaining partner dies, all monies within your pension fund are lost as they are retained by the fund. By transferring to an EU-approved scheme you will be able to pass on 100% of the assets to whomever you designate as a beneficiary, thus providing additional security for your loved ones.”
Transferring to a QROPS in Malta as a Dutch expat means you avoid all UK taxation. You just pay Dutch income tax when you draw your pension in retirement.
Why live and retire in the Netherlands (Holland) as a British expat?
Over 48,000 Brits live or work in the Netherlands (Holland). The Netherlands has a capitalist market-based economy, ranking 15th of 157 countries according to the Index of Economic Freedom. In May 2011, the Netherlands was ranked as the ‘happiest’ country according to results published by The Organization for Economic Cooperation and Development.
What Happens to My QROPS if I Move Back to the UK from Holland?
You won’t be taxed on any of the benefits you receive whilst you are offshore. None of the growth earned after transfer to the QROPS is subject to the normal 45% tax charge on lump sums on death and the 45% charge that does apply on the rest of the QROPS is levied against a much smaller amount, so normally there is a very low or no tax charge upon death even if you return to the UK at a later date.
To maximize advantages and keep tax to a minimum, you should seek to take the full 25% lump sum and full income from your QROPS before you return to the UK from Holland. You can also look to transfer your pension back into a UK SIPP to keep fees down. Any pension income or benefits taken from the QROPS as well as any growth from your QROPS whist abroad is not taxable in the UK. Please contact us for more details.QROPS Netherlands | British Expats Resident in the Netherlands by Richard Malpass