QROPS Rules / Regulations
How much can I put into a QROPS?
There is no limit what you can transfer into a QROPS, but you must be aware of the lifetime allowance which lowers each year. The lifetime allowance states how much you can save into a pension asset and claim tax relief. The current lifetime allowance of £1.5 million will be reduced to £1.25 million in April 2014.
Could QROPS be stopped by HMRC?
HMRC have brought in many new measures over recent years to ensure that any offshore scheme retains the spirit of a pension and ensure that the QROPS will provide income for the life of the member. It is evident that more rules will come into place but it is very difficult to reverse rules on a retrospective basis. The key is to ensure that you are moving into a scheme which is regulated and on the HMRC list on the year of transfer.
When is the best time to transfer into a QROPS? (just prior to retirement?)
Previously the widespread belief was that to save money the best time to transfer was in the 2 years prior to retirement in order to save costs. Now there is a better understanding of the crystallisation effects of the scheme and how this will affect future tax liability, especially Inheritance Tax. The movement of the scheme into a QROPS is what is known as a crystallisation event and when it comes to the calculation of IHT the lower this amount the better. In basic terms a scheme which was transferred 5 years ago with a value of £300,000 will have a smaller tax liability on death than a scheme which was left to grow until retirement and may crystallise at £700,000. The tax liability will be based on £300,000 rather than £600,000.
Can I take 100% of my pension?
NO. A QROPS must still be considered a pension, which will provide an income for life. Any offshore scheme offering 100% access to capital is breaking HMRC rules and could be subject to an 80% tax charge, which will be taken from the scheme value.
My Future Plan
What if I return to the UK?
If you plan to return to the UK then it is important to seek advice before making a transfer. There are potential tax benefits to having a QROPS, but you need to fulfil certain conditions in terms of the length of time you remain outside the UK prior to return.
What if I do not retire at 65?
Your pension will remain invested until you decide the right time to take an income. You must start taking the income before your 75th birthday.
What age can I retire?
Different jurisdictions have different rules when it comes to retirement but there would be potential to take a lump sum, and an income from the age of 50, as long as you fit certain criteria, again within the rules of HMRC.
Tax
Taxation rules are constantly changing, and while we update changes on a regular basis we are not tax advisors and recommend that you take tax advice in the country which you are living.
What are income tax implications of QROPS?
This really depends on your location and the rules which govern that location and the place where your QROPS is held. It is possible to minimise your income tax liability due to the portability of QROPS and enjoy an income tax level of 2.5% in many circumstances. Currently if you live in Thailand, and have a QROPS in Gibraltar then you would be subject only to the 2.5% charged by Gibraltar.
Will I be taxed on growth of my pension?
As long as your pension remains within an offshore scheme it will grow free of tax, your income from the pension will be taxed depending on your current residence and tax status.
UK Pension Deficit
What if my UK Scheme goes bust?
Your pension benefit will no longer offer you the income which you expected. There is a protection fund available (www.gov.uk/government/organisations/pension-protection-fund ). The amount which you would be entitled to is not guaranteed and is subject to change depending on funds available to the UK government. We can provide a more detailed analysis upon request.
Will the deficit reduce over coming years? (less people paying in etc.)
Pension deficits have been steadily rising over recent years and of the top 100 companies in the UK, there are less than 10 which do not have a pension deficit. The deficit amounts to the difference in funding of the scheme to what it’s liabilities will be over coming years. In short there are a growing number of retirees enjoying “final salary” benefits, who are living longer with less and less people paying in. We will post news articles on this situation so that you can judge for yourself.
Investment
Can I control where my money is invested?
You would need to discuss this with one of our investment advisors, but depending on the QROPS jurisdiction you and your advisor would have full control over where the money is invested.
What if I want to remain in cash?
You could do this, but with low interest rates and inflation still sitting around 3% you would be losing real value each year that you remained in cash. This would only be advised if you had adequate retirement income.
Income
Can I take more than 30% tax free lump sum?
In certain circumstances yes, but not in the first year, and the pension would still have to have a sufficient residual value to provide a minimum income of around £20,000 per annum.
Will I be able to take same income as I would in the UK?
Yes, and you would not be forced to purchase an annuity which some schemes in the UK would insist. The rules are changing during 2015 and coming under review would be the option to take 150% GAD (Govt Actuarial Dept rates) which would allow a larger drawdown from your offshore scheme than was previously allowed. In some cases taking the maximum drawdown may affect your future income so it is crucial that you discuss this with your advisor.
Death
This is actually the single most important reason why people take out a QROPS.
Can my pension be passed on to my children?
In current legislation in a UK scheme, NO it cannot be left to your children. With a QROPS 100% of the remaining pension can be left to your children or beneficiary.
Can I instruct how money is passed on (lump sum or income?)
Yes, through your instruction your next of kin can take a lump sum or have a defined income.
Can my Thai spouse be assisted locally should something happen to me?
Absolutely, your pension asset in a QROPS is there to give an income for life, not only for you but your immediate family. We work closely with families to ensure continuity of income if something should happen to the original member. This can be done through letters of wishes to your pension trustees and in some cases having legal representation in Thailand.
Can my Thai family be assisted here in Thailand if something happens to me in the future?
As above, and it is important to understand that the pension is an international scheme which is paid out to members around the world. Being in Thailand does not have any impact on this.
Am I able to ensure that my family get an income upon my death rather than having a lump sum which may be difficult to manage?
As discussed earlier, the member has complete control as to how your pension asset is distributed in the future. If you would prefer an income to be paid to your family this can be done through a letter of wishes which can cover a specified time frame or for their lifetime. Again the member (you) has complete control over this during your lifetime, to ensure that your family are looked after in the future.
Other questions
How could the new pension rules for 2015 affect my pension?
The UK government is in the process of changing rules behind pensions and transfers which are coming into play in 2015. These rules are designed to give pension holders more control over their pension and income for the future. The important factor which must be understood is the tax implications of liberating your pension. Only 25% will be paid out free of UK tax but the other 75% will be paid at the individuals marginal tax rate. The advantage for UK expatriates is that pensions can still transferred offshore with zero tax implication upon transfer, and minimal tax on income taken from the pension. If you want to understand the new rules better please request the information from us.
Am I eligible for a QROPS pension?
If you have a frozen Company or Private pension and live outside, or plan to live outside the UK then you could be eligible.
What happens if I return to the UK?
If you return to the UK there are different options which are open to you.
- The pension can be transferred back into a UK scheme (SIPP).
- You can remain in a QROPS but would have to be invested in UK compliant funds.
- You would be subject to UK income tax, but would only be taxed on 90% of income rather than 100% in a UK SIPP.
Of course you need to consider the 5 year rule before taking income, as the government will not allow the tax benefits from a QROPS to an individual who has not been out of the UK for more than 5 consecutive tax years. Please consult us for the current guidelines as they are constantly changing.
Will I save tax by transferring my pension offshore?
You would have the opportunity to save tax in different areas:
- Income tax
- Tax on growth of your investment
- Death tax
This is a complex matter which needs to be discussed with a professional, please contact us for more details.
Will I have to pay any tax on income from my QROPS pension?
Most likely you would pay some income tax, but it depends on your residence status at the time. The income tax can be minimized and through some jurisdictions you would pay as little as 2.5% income tax. Schemes which offered a zero income tax rate have been closed by HMRC and with dual tax treaties in place between different countries it is vital to select a pension trustee which operates in multiple locations to ensure you achieve the most attractive taxation position. If you have already moved your pension to a Guernsey pension then you could receive income free of tax in some locations, but unfortunately this option is not available to new QROPS transfers.
Is there a minimum value I can transfer to a QROPS pension?
Most schemes now have a £50,000 minimum investment.
Will my pension be managed?
You should ensure that you work with an advisor who will monitor your pension on a regular basis and have regular meetings with you to discuss investments and changes to your personal circumstances.
Can I choose the funds myself?
In certain schemes you would be able to have full input into where your funds are invested.
What are the costs of running a QROPS pension?
When looking at the cost of a QROPS you need to consider different costs which may be administered and make sure that you find the scheme which works for you. The costs which could be incurred are as follows:
- Trustee Cost
- Investment Cost
- Advisor / Management Cost
What types of pensions can I transfer offshore?
You can transfer most types of UK Pension Offshore (Company Schemes / Private Schemes / Final Salary Schemes / Defined Contribution Schemes) but you CANNOT transfer a Government (National Insurance) pension.
Can I transfer after I have started taking my pension?
In some cases the answer is “YES”. Please contact us for more details but in broad terms you cannot transfer if you have purchased an annuity, but if you are drawing down on the pension pot then it could be transferred.
Do I have to buy an annuity?
No.
Is everything lost (as in a conventional UK pension) when I die?
Absolutely not. The main motivation for many of our clients when considering a pension transfer is to ensure that their pension is protected for their family. In a traditional scheme the pension would die with the member, with a possible income available for the spouse. The spouse benefit is currently under scrutiny in Asia due to a widening gap between spouses and the strain on the pension company.
With a QROPS 100% of the remaining pension can be passed on upon death.
Why choose Expat Pensions Thailand?
Do you want to have face to face meetings with your advisor?
Do you want access to global trustee companies who can position your pension in the best possible scheme for taxation?
Do you want exposure to the largest banks and financial institutions in the world?
Do you want to be part of a global network who are responsible for around half of all UK QROPS?
Do you want to deal with someone who is familiar with your income and lifestyle needs?
Do you want to be sure that your family have direct contact with your pension asset if something happens to you?
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