QROPS Sweden. British Expats Can Avoid Tax on Their Private Pensions
British expats living in Sweden or wishing to retire in Sweden can now transfer their pension offshore into a QROPS in Sweden to avoid UK taxes and either transfer their pension from GBP to SEK or choose the currency of their pensions. British expats living or working in Sweden can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like Malta or New Zealand and will no longer have to pay UK taxes on their pension if they stay offshore. The main benefit of a QROPS is to avoid the 45% tax upon death in the UK post-75 if you are drawing your pension which means 100% of your pension pot can be paid as a lump sum to your loved ones.
For example, your current pension assumes a pension income in the UK of £10,000 per year. Depending on the pension scheme you hold, if you died in the UK for example with a DB pension scheme, your wife may get £5,000 per year as a pension and then this income would likely die with her. A move to a QROPS would mean your wife would get approximately £200,000 as a lump sum upon death which could be used to pay off a mortgage or put the kids through university.
Another benefit is that you can move your pension to the currency of your choice. You can keep your pension in GBP or move to the flexibility of USD or transfer to EUR. For those who will retire in Sweden permanently and if the exchange rates are favourable, a transfer from GBP to SEK may be a good idea.
For younger expats with a longer time frame, we think the USD offers better investment options with the potential of higher returns with lower risk.
Swedish expats who have worked in the UK and now live abroad can also move their pension to a QROPS to lower their tax bill and avoid the death tax in the UK.
Why live or retire in Sweden as a British expat? Why move into a QROPS?
In a 2005 survey by Eurobarometer, 89% of Swedes aged above 15 reported the ability to speak English. More than 19,000 Brits live and work in Sweden including 2,000 pensioners. For the Brits living in Sweden, you can take advantage of your offshore address to reduce UK tax on your pension as well as protect your wife and children from high taxation should anything happen to you.
Sweden is the 3rd largest country in the EU by area, with a population of around 9.4 million. Compared to continental Europe, Sweden has a relatively low population density of 21 inhabitants per square kilometre with the population concentrated to the southern half of the country. So, a move to Sweden means larger spaces for your house. Most British expats live in the capital Stockholm, with a population of 2m.
Today, Sweden is a constitutional monarchy with a parliamentary democracy of government and a highly developed economy, having long been one of the most affluent countries in the world. An industrial and technological leader in several fields, Sweden had the fastest economic growth, the highest levels of innovation and the most competitive economy in the European Union in 2010.
About 15% of Sweden lies north of the Arctic Circle. Southern Sweden is predominantly agricultural, with increasing forest coverage northward. Around 65% of Sweden’s total land area is covered with forests. Most of Sweden has a temperate climate, despite its northern latitude, with four distinct seasons and mild temperatures throughout the year.
Why Not Leave My Pension in the UK?
The UK and Sweden have a Double Taxation Agreement which came into force in 1983. Depending on where your houses are and your economic interest, you may get away with being taxed in the UK which is lower than Swedish income taxes. However, you would still get taxed on death in the UK after 75 years of age. The average life span of a male is 84.
A transfer to a QROPS would avoid any death taxes and would also allow you the freedom to invest wherever you like.
The Benefits of Moving our UK Private Pension to a QROPS in Malta for Residents in Sweden
What are the benefits of a QROPS Pension Transfer for British expats in Sweden?
• Avoid UK income tax
• Avoid UK dividends tax
• Avoid UK capital gains tax (CGT)
• Avoid 45% tax upon death after 75 years of age
• Only pay Swedish income taxes if you retire in Sweden. If you retire elsewhere abroad, but not the UK, your income tax bill might be substantially lower.
• Currency choice. You can move your UK pension to SEK, EUR, USD or any currency of your choice or hold it in Sterling.
• Have the ability to make higher returns with freedom of investment
• Family Protection: Upon death, the entire pension pot gets passed on to your nearest and dearest
• Security: The pension is held in a secure jurisdiction such as Malta or New Zealand who both have Double Taxation Agreements (DTA’s) with Sweden.
What is QROPS Sweden?
A Qualifying Recognized Overseas Pension Scheme (QROPS Sweden) allows your UK pension to be transferred offshore to reduce your tax burden. Effectively, you will no longer pay UK tax on your pension whilst you are offshore and after 10 years of living offshore, the reporting requirements to HMRC cease. The reporting is done by the QROPS trustees, you don’t need to worry about it.
You can take a 30% lump sum in cash from your pension once you have been offshore for 5 years and then you can take a pension income of 150% of UK GAD rates. You can also take 50% of any increase in the pension pot every 3 years.
Are There Any QROPS in Sweden itself?
Yes there are 7 Swedish QROPS on HMRC’s list including Danica pension in Sweden (whose website is only in Swedish) and Nordea pension. The issue with a QROPS in Sweden is you would pay Swedish income taxes which is often higher than UK or Malta taxes. It may also be more difficult to transfer back out if you ever go back to the UK or retire elsewhere.
Tax on a QROPS in Sweden
You are a resident in Sweden if you have a home or dwelling in Sweden or if you spend six months or more per year.
Employment income for non-residents in Sweden and investment income are subject to tax at flat rates.
Employment income for residents in Sweden and other earned income for both residents and non-residents are subject to both municipal income tax and national income tax. Municipal income tax is levied at a flat rate, which varies from one municipality to another. The present average rate is approximately 31%. National tax is levied at a rate of 20% on the portion of earned income between SEK433,900 and SEK615,700. The rate is 25% on the portion of earned income exceeding SEK615,700.
The following combined rates of tax arise assuming that the municipal tax rate is 30%.
Income tax table for 2014 – Employment income (including QROPS and pensions)
Income (SEK) Progressive Tax Rate (%)
0 – 433,900 31
433,900 – 615,700 51
The Swedish government intends to increase personal income tax in 2015 on incomes over SEK 50,000 per month through a reduction in tax rebates for 2015.
QROPS in Sweden
There are 7 QROPS trustees in Sweden according to HMRC’s website.
- Danica Pension Sweden
- Danica Private Pension Sweden
- Defined Premium Service Pension (Arbetsgivarplan) Sweden
- Handelsbanken Liv Forsakringsakticbolag Sweden
- Kapital pensionsförsäkring Sweden
- Nordea Pension Plan Sweden
- Swedbank Forsakring AB Sweden
However, we recommend considering moving into a Malta QROPS as it allows a much greater freedom of what you wish to invest in and also pays a lower tax rate than Sweden.
New Zealand QROPS for British Expats in Sweden
- Avoids UK income tax of 0% – 50% and 45% tax upon death in the UK
- Avoids NZ taxation for British expats in Sweden
- 100% of pension pot can be passed on as a lump sum upon death
- 5 investment strategies based on your risk profile
Malta QROPS for British Expats in Sweden
- Avoids UK income tax of 0% – 45% and 45% tax upon death in the UK
- Income tax is paid out gross, free from tax in Malta. You then pay Maltese income taxes only if you draw your pension in Sweden. Malta is an EU country.
- 100% of pension pot can be passed on as a lump sum upon death
- You can take 50% of any increase in your pension pot after transfer as a lump sum every 3 years
- Much wider range of investments available. Can purchase most shares, ETFs, bond funds, hedge funds, etc.
- Can choose currency, e.g. transfer GBP to SEK, USD, EUR, etc.
We recommend a Malta QROPS for pensions of 100k+ and NZ QROPS for smaller QROPS in most circumstances as the NZ QROPS is substantially cheaper, but has a very limited strategy which means returns may be considerably lower than a Maltese QROPS.
Tax on a QROPS in Malta for Swedish Residents
British expats and Swedish residents will pay the following taxes on their pension in Malta:
Chargeable Income in EUR Income Tax Rate Tax Deductions in EUR
0 – 700 0 0
701 – 3,100 0.20 140
3,101 – 7,800 0.30 450
7,801+ 0.35 840
Do I need to move my pension to Sweden?
No. Your pension can be transferred to a secure jurisdiction such as NZ or Malta where it will be out of the UK tax system and your pension will grow tax free. A QROPS in Malta or NZ only has Swedish taxes on income. They avoid the UK death tax.
What Happens to My QROPS if I Retire Outside of Sweden?
You continue to get QROPS benefits as long as you remain outside the UK. As long as you are outside the UK, your QROPS will grow free of UK tax. If you ever return to live permanently in the UK, your pension can either be transferred to a UK Self Invested Pension Plan (SIPP) rules or it will continue, but be taxed in the UK. However, a QROPS will also get time apportionment relief which could reduce the tax burden upon death even if you return to the UK.
For enquiries, please send email to email@example.com
QROPS Sweden article written by QROPS Specialists.QROPS Sweden for British Expats in Sweden to Avoid Taxes on Their UK Pensions by Richard Malpass