QROPS Benefits
Her Majesty’s Revenue and Customs (HMRC) in the UK allows individuals moving abroad to transfer their UK pension funds to Qualifying Recognised Overseas Pensions Schemes (QROPS).
The primary reason for transferring funds is that the UK pension scheme member has permanently migrated overseas. If possible, pension funds should move to a suitable QROPS arrangement in the client’s new home country too.
The main attractions of a QROPS over a UK scheme are
· the flexibility in taking benefits from the fund. One of the major drawbacks of the UK pension system is the requirement to purchase an annuity or income stream with the majority of the pension fund. Many pension schemes throughout the world that are approved by HMRC as QROPS are based in jurisdictions where the local tax rules do not require an income stream to be paid to the member at retirement. This level of flexibility appeals to migrants who do not wish for their benefits to be dripped out of their schemes over a long period of time.
· UK pension scheme’s widow’s and dependants benefits can be equally restrictive. By transferring funds into the right QROPS there could be lump sum benefits available for dependants on death as well as avoiding UK inheritance tax (IHT) on the fund as a QROPS falls outside the UK IHT regime.
· QROPS also appeals to potential migrants and returning foreign nationals, whose UK funds are approaching the Lifetime Allowance (currently £1.65 Million in tax year 2008/09). In the UK a 40% tax is imposed on the crystallisation of an individual’s UK pension rights exceeding the Lifetime Allowance. In many cases this limit can be exceeded simply with investment growth. By transferring to a QROPS, an individual can avoid this pension charge completely as once the funds enter the QROPS they cease to be considered UK pension rights.
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.
The primary reason for transferring funds is that the UK pension scheme member has permanently migrated overseas. If possible, pension funds should move to a suitable QROPS arrangement in the client’s new home country too.
The main attractions of a QROPS over a UK scheme are
· the flexibility in taking benefits from the fund. One of the major drawbacks of the UK pension system is the requirement to purchase an annuity or income stream with the majority of the pension fund. Many pension schemes throughout the world that are approved by HMRC as QROPS are based in jurisdictions where the local tax rules do not require an income stream to be paid to the member at retirement. This level of flexibility appeals to migrants who do not wish for their benefits to be dripped out of their schemes over a long period of time.
· UK pension scheme’s widow’s and dependants benefits can be equally restrictive. By transferring funds into the right QROPS there could be lump sum benefits available for dependants on death as well as avoiding UK inheritance tax (IHT) on the fund as a QROPS falls outside the UK IHT regime.
· QROPS also appeals to potential migrants and returning foreign nationals, whose UK funds are approaching the Lifetime Allowance (currently £1.65 Million in tax year 2008/09). In the UK a 40% tax is imposed on the crystallisation of an individual’s UK pension rights exceeding the Lifetime Allowance. In many cases this limit can be exceeded simply with investment growth. By transferring to a QROPS, an individual can avoid this pension charge completely as once the funds enter the QROPS they cease to be considered UK pension rights.
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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