QROPS - need advice please

gemscot1

I am planning to live overseas within the next 5 years but with the lifetime allowance being reduced I think i may need to move overseas earlier. I think moving to qrops is the answer but a little apprehensive in reading about these dodgy advisors - anyone care to give me any advice - an idea of what charges I should expect to pay would be fantastic

thanks in advance

Aegis

gemscot1 wrote: »

I am planning to live overseas within the next 5 years but with the lifetime allowance being reduced I think i may need to move overseas earlier. I think moving to qrops is the answer but a little apprehensive in reading about these dodgy advisors - anyone care to give me any advice - an idea of what charges I should expect to pay would be fantastic

thanks in advance

It's a very specialist area of advice, not least because the number of QROPSs available is staggeringly high - after all, the term only needs to apply to certain categories of overseas schemes. In practice you tend to find that the transfer is to a jurisdiction which maintains friendly but favourable tax status with the authorities where you plan to retire.

Given the level of customisation needed in this area, I'd be very surprised if there were standard fees, but I would be surprised to see such a service offered for less than a few thousand pounds.

jamesd

There is to be protection for those already over the lower lifetime allowance.

Are you 55 yet? If you are, do you know that the lifetime allowance when you take pension benefits is calculated as a percentage of the allowance at the time you do that? Then that percentage is saved, not the amount. So you could take 90% of a £1.25 million allowance than later still take 10% of a £1 million later. Even though that would take you to £1.225 million used in total you wouldn't be over the lifetime allowance.

So your best option initially may be not to use QROPS but to take benefits as soon as you can, before the allowance drops. Since this isn't using any protection scheme you'd also be free to continue paying money into pensions over the next five years if you wanted to, subject to that not using more than the remainder of your LTA.

Assuming you're 55 or older, do you know that you can start capped income drawdown and take out the 25% tax free lump sum plus the GAD limit amount of income without triggering a reduction in your annual pension contribution allowance from £40k to £10k? Wait until 6 April 2015 and the ability to start new capped drawdown vanishes, but you can still transfer money into any started before than. Under the replacement flexi-access drawdown system even a penny more than the 255 triggers the annual allowance reduction.

If you do fancy moving abroad, you might consider spending long enough in Portugal to qualify as tax resident. They have a 0% income tax rate on foreign pension income. So you could move there, switch to flexi-access drawdown and take out your whole pension pot tax free, then move on to wherever you want to end up. Be sure to read the caveats if you return to the UK instead of staying abroad somewhere.

gemscot1

wow thanks for all the help - this is great.

I am 46 years old so I cannot use the 55 trick but that sounded good idea

I am planning to move to Spain but if Portugal works better then maybe its an idea - thanks will look at that link

gemscot1

it looks like I might be better moving pension to Malta and then moving to portugal - once I have been a non resident for 5 years then I can take the whole pension tax free - I think thats the logic - I never thought it would be possible to take the whole pot tax free - kind of mind blowing

jamesd

Portugal beats that, it only takes half a year plus a day and then not returning to the UK for a while.

The five years is probably the rule based on HMRC reporting requirements for QROPS. The Portugal one is just Portugese income tax rate combined with its double taxation blocking treaty with the UK. Not even a need to move the pension plan out of the UK with QROPS to use the Portugese one (and you can't if you move it to a Portugese QROPS).

gemscot1

Thanks James - I am a little confused though

I will hit the Life time allowance soon so I thought if I moved my pension overseas via qrops then I would not be hit with that. That would be the only reason to move away from UK

Under the qrops rules I thought I needed to be non resident for 5 years before the UK didnt have any claim against me re tax

I was thinking about Portugese qrops but wondered if that could complicate things as the income would not come from overseas so thought Malta might be best - also I think Malta allows you to take the whole 100% as cash which I can then take out tax free via being a Portugese resident

Clearly I am a newbie so happy to be advised if I have misunderstood things

atush

Be careful who you use in malta.

Aegis

gemscot1 wrote: »

it looks like I might be better moving pension to Malta and then moving to portugal - once I have been a non resident for 5 years then I can take the whole pension tax free - I think thats the logic - I never thought it would be possible to take the whole pot tax free - kind of mind blowing

Be very careful about this strategy. If, for example, you move to somewhere like Portugal and withdraw your whole fund tax free but then move back to the UK after 3 years, you would be presented with an income tax bill for the entire balance of your pension fund (less tax free cash) as though you had taken the full balance on the date of your return to the UK. This could be a crippling impact on your retirement, as the majority of a significant withdrawal would be at 45% compared to the 20-30% average you might have achieved by staying residence and drawing modestly.

My usual advice to clients is not to withdraw funds from pensions before they need them, accepting that this might be less effective than the most aggressive tax minimisation strategy but a whole lot less risky in most cases.

jamesd

The Portugese plan specifically blocks income from Malta as being eligible because they consider Malta to be a tax haven, I think two others are also specifically blocked, the Channel Islands and Isle of man, maybe more. But check the details to be sure if this might apply to you.

You're right about five years being the QROPS reporting time limit but wrong about thinking that's actually totally safe.

There is going to be transitional protection for the lifetime allowance so you could use that protection and leave the money in the UK.

I'd take the Portugal route. It's clean and faster and any lifetime allowance charge you might get is likely to be lower than your costs and income tax bill in Malta.

Do note the caution about returning to the UK, there's more in the discussion I linked to.

Kit_Carson

There is a five-year anti-avoidance provision that could catch people.

If an individual was UK resident for at least four out of the past seven years prior to departure, and the period of non-UK residence is for five years or less.

But from April , tax will only be payable if total relevant withdrawals from UK pensions or QROPS ( in this case of temporary non-UK residence) exceed £100,000.