UK Pension Transfers to QROPS for British Expats Resident in the Netherlands and Dutch Expats Returning from the UK
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 55% 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.
Why transfer to a QROPS in Malta as a British expat resident in the Netherlands?
- Avoids all tax on growth of your pension fund
- Avoids any tax on death
- 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
How Would a UK Pension Transfer to a QROPS Work 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 30% lump sum at 50 as long as you have been offshore for 5 years, otherwise you can only take a 30% cash lump sum at 55.
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.
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 30% 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 55% tax charge on death and the 55% charge that does apply on the rest of the QROPS is levied against a much smaller amount, so normally a very low or no tax charge upon death.
To maximize advantages and keep tax to a minimum, you should seek to take the full 30% 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 for British Expats Resident in the Netherlands by Richard Malpass