Finance
UK PENSION TRANSFERS
By Aaron Crotty
From April 2015 a ban
will be introduced
on the transfer of
most public sector
pensions. If you hold
such a pension, such
as a Teacher’s Pension
and are considering
transferring it, you
should take advice now.
T
his month’s article will focus on
expatriates who resided and
worked in the UK. By law the
any UK employer has to provide
a pension scheme for their employees,
but what happens once you leave a
particular employer? Are there options
available?
As an expatriate with a UK occupational
or personal pension scheme, you
can do one of three things. You can
leave your pension exactly where it is
or you can transfer it to either a Self
Investment Personal Pensions (SIPP)
or a Qualifying Recognised Overseas
Pension Scheme (QROPS).
SIPP (SELF INVESTED
PERSONAL PENSION)
SIPPs are intended for those who
plan to retire in the UK. SIPPs offer
investment advantages over traditional
pensions, such as greater flexibility
and investment choice. They are not
restricted to the limited fund range
usually offered with an occupational
or personal pension scheme. You have
the option to set your own level of
investment risk and even select your
own investment portfolio if you wish,
although your money would usually be
managed for you. You can also have
more flexibility over when and how
you take your tax-free cash and your
income.
• A SIPP is also a way of amalgamating
all your pensions into one pot for
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ease of administration.
• A SIPP falls under UK HMRC pension
regulations and income taken
from a SIPP is subject to UK Income
Tax. You can start to take pension
benefits from age 55 and at that
time, can take up to 25% of your
pension as tax-free cash.
• A SIPP is fully inheritable without
death tax before retirement. After
retirement, 100% of its value can
provide a dependent’s pension,
but if a lump sum is taken by the
dependent it will be subject to
taxation.
• SIPPs can be converted to a
Qualifying Recognised Overseas
Pension
Scheme
(QROPS)
at anytime, if a change in
your circumstances makes it
advantageous.
QROPS (QUALIFYING
RECOGNISED OVERSEAS
PENSION SCHEME)
QROPS are intended for those who
plan to retire outside of the UK with no
intention of ever becoming a resident
in the UK during retirement. QROPS
involve transferring your UK pension(s)
into another country’s jurisdiction for
retirement abroad. The most popular
countries offering QROPS currently
include; New Zealand, The Isle of Man,
Malta and Gibraltar.
Although QROPS are held outside of
the UK, they remain subject to HMRC
After The Bell
regulations. HMRC limits the taxfree lump sum that can be taken at
retirement. This is set at 30% although
our New Zealand QROPS allows 30% of
the initial investment plus 100% of the
growth since the start of the QROPS.
It is not possible to fully en-cash a
QROPS legally and anyone doing so
will be subject to a 55% tax penalty
imposed by HMRC. You can start a
QROPS at any time, but you must be
out of the UK for 5 full tax years to
receive the benefits of a QROPS.
Benefits include no UK income tax
on your pension income. You may be
subject to income tax in the country
where your pension is held and also in
the country where you will retire. This
requires a careful selection of your
QROPS jurisdiction and an awareness
of Double Taxation Agreements to
minimise or eliminate income tax
payable. We will help with this.
QROPS in Malta, Gibraltar and the
Isle of Man allow you great investment
flexibility. On the other hand, a New
Zealand QROPS has a Discretionary
Fund Manager who manages your
investments on your behalf according
to applicable regulations.
There is no death tax applied to
a QROPS, meaning that it can be
fully inherited both before and after
retirement.
For additional information, contact Aaron
Crotty at: [email protected]