Qrops

mania112

i think by 'tax advantages' we are simply comparing the UK income tax regime versus the country you're moving it to.

pforma1

Basically you have to be non-UK resident for 5 complete tax years before you retire (after age 55) for the local pension rules where the QROPS scheme is based to apply - if not, the UK pension limits still apply eg. 25% lump sum at retirement, income by way of reference to UK GAD tables, 55% charge on fund paid as a lump sum on your death.

After 5 years non-UK residency, typically a QROPS can pay a 30% lump sum upon retirement (after age 55) and might be able to pay income at a higher level than GAD tables eg. if the scheme is based in IoM or Gibraltar. However, a key benefit is that the lump sum return of fund paid on death avoids the 55% charge that would apply to a similar UK pension scheme such as a SIPP.

Other benefits would include the ability to invest in assets other than those just denominated in sterling - very useful for an expat looking to avoid currency risk - and access to a wide range of assets to invest in (though the same permitted investment classes as UK pensions still apply eg. cannot invest in residential property).

Finally, double taxation of the pension income (at source where the scheme is based and in your country of residence) can be avoided via double tax agreements or unilateral tax-relief. This might mean paying a lower rate of income tax on pension than the equivalent rate paid at source in the UK from a UK pension scheme, depending on where you reside and where the QROPS scheme is based.

Thockley

pforma1 wrote: »

After 5 years non-UK residency, typically a QROPS can pay a 30% lump sum upon retirement (after age 55) and might be able to pay income at a higher level than GAD tables eg. if the scheme is based in IoM or Gibraltar. However, a key benefit is that the lump sum return of fund paid on death avoids the 55% charge that would apply to a similar UK pension scheme such as a SIPP.

Other benefits would include the ability to invest in assets other than those just denominated in sterling - very useful for an expat looking to avoid currency risk - and access to a wide range of assets to invest in (though the same permitted investment classes as UK pensions still apply eg. cannot invest in residential property).

Finally, double taxation of the pension income (at source where the scheme is based and in your country of residence) can be avoided via double tax agreements or unilateral tax-relief. This might mean paying a lower rate of income tax on pension than the equivalent rate paid at source in the UK from a UK pension scheme, depending on where you reside and where the QROPS scheme is based.

Thank you - this explains the benefits well.

pforma1

Just to correct one of the earlier posts above.

After 5 years of non-UK residency the IoM can pay a lump sum of 30% of fund value in a QROPS.

However, the default income tax rate would be 20%, not 5%, on any pension income in retirement.

This might be avoided though if a valid double tax agreement exists between IoM and the country of residence for the pensioner (or a credit may be given for the 20% tax paid at source in IoM against any local tax due, by the tax authority where the pensioner resides, by way of unilateral tax relief).

Since the HMRC rule changes on QROPS in April 2012, it has become more complex and the most suitable QROPS scheme jurisdiction will depend on where you plan to retire to - always seek professional advice from an adviser with suitable pension credentials and qualifications eg. UK Chartered Insurance Institute has the G60, J04 and J05 pension exam qualifications.

atush

However, the default income tax rate would be 20%, not 5%, on any pension income in retirement.

I don't recall saying this (as pension is income so therefore taxed), but was talking about the tax charge to beneficiaries after death of the pensioner in DD. And found it on the website of a Manx qrops company, but as I said I have not looked at the regs to see if true.