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Self Managed QROPS – UK Pension Transfers Overseas


Self-Managed QROPS

Self-managed QROPS are self-managed pensions for British expats living abroad. A self-managed overseas pension scheme isn’t technically possible, but a self-directed pension is allowable under QROPS rules.

Many British expats who are currently managing their own pension via a UK SIPP can now transfer their pension overseas to a QROPS for tax purposes and direct the investments themselves, however self-managed QROPS, per se, are not allowed.

Self-managed SIPPs have been around for years, but due to HMRC rules, QROPS trustees must sign off on any investment in a QROPS, so strictly speaking “self-managed QROPS” do not exist. However, you can have a “self-directed” QROPS out of Gibraltar, Malta, Australia and several other jurisdictions.

Transfers from a self-managed SIPP to a self-managed QROPS are starting to become more popular and online fund platforms which allow self-directed fund choices are now emerging.

Please email us about our self-directed fund platform solution for QROPS.

Does HMRC allow self-managed qrops?

Technically, HMRC do allow self-managed QROPS and as you will see below, the Australian and Kiwisaver schemes allow self-management, but in practice, the trustees must sign off on all QROPS decisions, which means they aren’t as simple as UK SIPPs in most cases.

Jersey, Switzerland, South Africa and Luxembourg don’t seem to have any self-manged QROPS for instance and New Zealand QROPS schemes have a narrower choice of self-directed investments.

The Isle of Man, Malta and Gibraltar now have self-directed options though.

These QROPS investments can work on an “execution only” basis, where clients direct their financial advisers to their fund choices and then the trustees will review and sign off on the fund choice. So, it is not as simple or as flexible as a UK SIPP.

But, do you really want a self-managed QROPS?

Whilst HMRC allows self-directed QROPS, trustees have to report to HMRC and carry heavy responsibilities, so many QROPS trustees will not allow self-managed QROPS or will only allow a portion of a QROPS to be allocated to a fund platform, although things are changing fast in the industry as there are so many clients who already have self-managed SIPPs in the UK.

We have a solution which allows clients to self-direct their QROPS.

Gibraltar Self-Managed QROPS

Gibraltar QROPS trustees are more flexible and allow clients to put 100% of their UK pension into a fund platform structure. It is then up to the client and the adviser as to what fund a client selects. A client can opt for an “execution only” style QROPS, where they direct exactly what investments they like.

  • Gibraltar QROPS have a flat rate of 2.5% on their pension income.
  • Gibraltar QROPS avoid tax on growth and death
  • Gibraltar QROPS allow investment into an online fund platform.
  • 70% of your pension must provide an income for life
  • 30% can be taken tax free
  • Retirement income can be taken at 150% GAD rate
  • You can access your pension at 55

Malta Self-Managed QROPS

Malta QROPS have a variable income tax that depends on the Double Taxation Agreement with the country you reside in. The tax may be more or less than the UK depending on the DTA. Often income tax can be very low or even zero in some cases.

  • Malta QROPS avoid tax on growth and death
  • Malta QROPS allow investment into an online fund platform
  • Malta QROPS will allow access to 100% of your pension pot, although this will take some
  • time for the trustees to implement, perhaps in the latter half of 2015
  • 30% can be taken tax-free as a cash lump sum after 55
  • You cannot access your pension before 55

Click here to learn more about self managed QROPS in Malta.

Isle of Man Self-Managed QROPS

The Isle of Man offers many additional benefits to British expats in terms of their pension transfers. For example, the flexibility offered in terms of investment direction. Funds can be self-directed, or delegated to an advisor or investment manager. This is a major advantage, as many other jurisdictions prohibit the self-direction of investments.

John Buckley SIPP, the Sipp Specialists (IOM) Scheme and SIPPSONLINE Ltd Personal Pension Scheme as well as Boal & Co. operate populate QROPS in the Isle of Man.

Income tax on an Isle of Man QROPS depends on the DTA with your resident country. If it doesn’t exist, the income tax is a flat rate of 20% with no personal allowance. Countries such as Bahrain and Singapore will have zero income tax.

  • Isle of Man QROPS has a 7.5% tax on death
  • Isle of Man QROPS allow investment into an online fund platform
  • 70% of your pension must provide an income for life
  • 30% can be taken tax free
  • Income drawdown is more flexible than Gibraltar and a larger annual income may be taken
  • You can access your pension at 55

Self-Managed QROPS Rules

In order to qualify to be a QROPS, the trustees must demonstrate that:

(1) its rules must provide that at least 70% of a member’s UK tax-relieved scheme funds will be designated by the scheme manager for the purpose of providing the member with an income for life, and
(2) the pension benefits payable to the member under the scheme (and any lump sum associated with those benefits) must be payable no earlier than they would be if pension rule 1 in section 165 Finance Act 2004 applied, i.e. you cannot access your pension before 55 years of age.

Australian Self-Managed QROPS

Many Australian QROPS have now been delisted due to the fact they fail HMRC’s condition on accessing retirement benefits before 55. So, you need to be very careful when selecting an Aussie self-managed Supers or you could end up with a 40% unauthorised tax charge + 15% unauthorised charge for the UK pension scheme.

Self-Managed Superannuation Fund (SMSF)are allowed to be QROPS, but they must satify HMRC’s rules. The self managed superannuation funds cannot allow access before the age of 55 or make loans to members.

Australian Self-managed Superannuation QROPS were particularly mentioned in the HMRC QROPS FAQ sheet that the Inland Revenue produced in 2012. Details of which follows below:

Q. As a complying regulated Superannuation fund satisfies the requirements of an “overseas pension scheme” if its primary purpose is to pay pensions and as there exists a Double Taxation Agreement that contains exchange of information and non-discrimination provisions between Australia and United Kingdom, Article 23 and 27 of the 2003 UK Convention refers, would a transfer to such a fund qualify as a recognised transfer?

A. Yes, if the other QROPS requirements are met. The onus is on a scheme manager to satisfy himself that primary condition 2 in SI 2006/206 is met, but it is our understanding that an Australian complying regulated Superannuation fund will meet this condition. Australia does come within regulation 3(2)(c) in SI 2006/206.
Australian Self Managed Funds (similar to SSAS and SIPP)

Q. Is it correct that a SMF cannot be granted QROPS status as it is not open to the public and so doesn’t meet Primary Condition 1 of The Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) Regulations 2006 (SI 2006/206)?

A. No, that would not prevent a SMF being a QROPS. Primary condition 1 will be met by a SMF provided it is open to residents of Australia i.e. it is not exclusively for non-residents.

Transfer of benefits in payment

Q. Will it be possible to transfer a UK pension to Australia, where benefits are either providing unsecured Pension benefits or alternatively secured pension benefits (i.e. UK pension is in draw down). We note that UK pension annuity transfers would not be authorised outside EEA.

A. Yes, this would be a recognised transfer under section 169. But once the unsecured pension (UP) fund or alternatively secured pension (ASP) fund is transferred it will need to stay within the authorised payment rules. So they will need to stay within the FA 2004 maximum withdrawal limits and basis periods for USP/ASP funds. The regulations (SI 0499 of 2006) dealing with treatment of transfers of pensions in payment, including transfers of UP/ASP funds will also apply. The sums and assets transferred are treated as remaining under the same arrangement for UK tax purposes.

Where an individual is in receipt of an annuity, pension rule 4 in s165, paragraph 3(1) of schedule 28 and s275 mean that the annuity can only be transferred to an EEA insurance company. SI0499 of 2006 also covers transfers of lifetime annuities. Where a lifetime annuity is payable following the transfer it is treated as the same lifetime annuity for tax purposes.

Self-Managed KiwiSaver QROPS

Many Kiwisaver schemes in New Zealand have been struck from HMRC’s QROPS list as they allow early access to a pension in retirement. However, some NZ QROPS have been written with British expats in mind from the outset and still allow transfers, but they aren’t self managed, they are also not Kiwisaver QROPS and they require a NZ discretionary fund manager. Most NZ QROPS allow a choice of around five fund choices ranging from conservative to aggressive investing.

Canadian Self-Managed QROPS

Self-managed QROPS in Canada are not allowed, but self directed QROPS in Canada are possible.

CIBC and Scotia have self-directed QROPS in Canada. If you want to move your pension to a self-directed RRSP, these are your options. However, if you are ever considering returning to the UK, you may consider transferring to a Malta self-directed QROPS instead. Malta has a DTA with Canada, meaning the tax is shared between these jurisdictions, but capped at 15% on income.

Once you are in an RRSP, you cannot transfer out, so if you are just working in Canada, but wish to retire elsewhere, Malta may be a better option.

Hong Kong Self-Managed QROPS

Hong Kong QROPS are becoming increasingly popular due to their structure as a tax recognised occupational pension scheme. Hong Kong also has many Double Taxation Agreements, many of which give the taxing rights to Hong Kong, so that could mean zero tax on your QROPS in many cases.

You cannot self-manage a pension as such in Hong Kong as the trustees need to sign off on all investments, but there is a huge range of investments that you can choose from.

Malta Self-Managed QROPS

Similar to HK, Malta QROPS cannot be self managed, but can be self directed. Tax in Malta depends on the intracacy of the individual DTA treaties. Tax can be anywhere from 0% to 35%.

Gibraltar Self-Managed QROPS

Gibraltar QROPS cannot be self managed, but can be self directed. Gibraltar doesn’t have double taxation agreements with other countries, but there is a flat rate of income tax of only 2.5%.

Irish Self-Managed QROPS

Self-managed QROPS in Ireland are not allowed, but self-directed QROPS in Ireland are possible.

Irish QROPS have recently suffered the same fate as Australian and NZ QROPS as they allow early access at 50 years old, so be careful which QROPS you invest in and ask to speak to a QROPS specialist for guidance.

At the moment, the Davy Self Directed PRSA in Ireland is still on HMRC’s list.

Self-Managed QROPS for Expats in the USA

The USA does not allow self-managed QROPS, financial advice must be given and the QROPS trustees must review every choice. Furthermore, if you move to a QROPS, the investments must be UK and US regulated. There are specific investments which are US regulated, but also UK reported. Please ask us for the list. You can choose initially the funds from this list, but you cannot actively manage the funds as the trustees need to sign off on the investments ever time.

Please email us for our solutions if you want to self-manage your own QROPS. Whilst self-management isn’t allowed, self direction is allowed in many circumstances.

Self Managed QROPS - UK Pension Transfers Overseas by

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