The Pitfalls of QROPS
Although a migrant may gain many benefits from transferring their UK pension funds to a Qualifying Recognised Overseas Pensions Scheme (QROPS) Her Majesty’s Revenue and Customs (HMRC) have legislation in the UK that has to be followed, by both the QROPS scheme and the member.
If the HMRC rules are not followed the member could find themselves subject to heavy UK tax charges with sanctions can being imposed on the QROPS scheme.
Although local rules may allow a QROPS to pay lump sum benefits to its members, a transfer of UK pension funds to that scheme does not automatically mean the UK pension funds are immediately subject to the local rules of the scheme.
As part of the conditions of becoming a QROPS and being able to receive transferred UK pension funds, the Overseas Scheme, when registering with HMRC, must agree to report any payments made from the scheme to the member for the first 5 complete UK tax years of the member’s overseas residency. This period is known as the ‘Reporting Period’.
During the Reporting Period, payments to the member must not exceed the allowable UK Government Actuary’s Department limits and must not be made to the member before retirement age 50 (increasing to age 55 on 6th April 2010).
This means that someone migrating today can not transfer their funds to a QROPS and take their benefits as an entire lump sum immediately – regardless as to what the local rules allow. (HMRC have investigated many QROPS in Singapore and have removed their approval, presumably because they have not being following the UK rules.)
Whatever your financial intentions, seeking advice early from the qualified advisers at Montfort International (info@miplc.co.uk, call 01483 202072 or freephone 0800 018 3571) before you finalise your migration plans can help you to a more comfortable retirement overseas.
If the HMRC rules are not followed the member could find themselves subject to heavy UK tax charges with sanctions can being imposed on the QROPS scheme.
Although local rules may allow a QROPS to pay lump sum benefits to its members, a transfer of UK pension funds to that scheme does not automatically mean the UK pension funds are immediately subject to the local rules of the scheme.
As part of the conditions of becoming a QROPS and being able to receive transferred UK pension funds, the Overseas Scheme, when registering with HMRC, must agree to report any payments made from the scheme to the member for the first 5 complete UK tax years of the member’s overseas residency. This period is known as the ‘Reporting Period’.
During the Reporting Period, payments to the member must not exceed the allowable UK Government Actuary’s Department limits and must not be made to the member before retirement age 50 (increasing to age 55 on 6th April 2010).
This means that someone migrating today can not transfer their funds to a QROPS and take their benefits as an entire lump sum immediately – regardless as to what the local rules allow. (HMRC have investigated many QROPS in Singapore and have removed their approval, presumably because they have not being following the UK rules.)
Whatever your financial intentions, seeking advice early from the qualified advisers at Montfort International (info@miplc.co.uk, call 01483 202072 or freephone 0800 018 3571) before you finalise your migration plans can help you to a more comfortable retirement overseas.
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