Posts Tagged ‘QROPS Lump Sum’

Last Opportunity for New Zealand QROPS

Monday, December 12th, 2011

On 6th December 2011, HMRC released a ‘consultation’ document which will, in effect, mean that the opportunity for overseas residence to transfer their UK pension benefits, to a Qualifying Recognised Overseas Pensions, and receive up to 100% of the funds value as a lump sum, will no longer be available from 6th April 2012.

The Changes

Amongst the key points to the proposed QROPS legislation changes is the requirement for New Zealand schemes, looking to receive UK pension transfers, to ensure that their scheme will provide at least 70% ‘income for life’ from the UK transferred fund.

In addition, the current trustee ‘reporting period’ to HMRC for benefits paid from all QROPS, will be extended from 5 years of non-UK residency to 10 years after the member transfers out of a UK registered pension scheme.
It is these major changes to the QROPS rules that will mean UK pension members, who have been outside of the UK for more than 5 complete UK tax years, will no longer have the option to transfer their UK pensions (after 6th April 2012) to a New Zealand QROPS and receive 100% of their funds, as a lump sum, immediately.
Opportunities pre 5th April 2012

• If you have already been outside of the UK, for more than 5 complete UK tax years, AND
• Wish to receive greater than 25% of your UK pension as a lump sum, please contact Global QROPS immediately.

There is a limited time period between now and 5th April 2012 to transfer UK pension benefits to New Zealand and receive these benefits as a lump sum.

Please call +44 (0) 1372 724249 of email info@globalqrops.com for more information.

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Global QROPS comments in the Financial Times Adviser

Thursday, December 9th, 2010

Once again, the leading UK based financial advisers on UK pension transfers overseas, Global QROPS Ltd, have been asked their opinion by the Financial Times.

As already established, QROPS in the Isle of Man underwent a major change, earlier this year, when the withholding tax on income paid from their QROPS scheme (at a rate of 20%) was withdrawn.

Further to this change, the Isle of Man has looked at the possibility to increase the tax free cash entitlement, to overseas residents who are members of their schemes – within the existing QROPS legislation. (more…)

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UK Expat Pension Members in Retirement

Thursday, January 14th, 2010

There are many UK expats that are currently working overseas for foreign companies or for the overseas arm of a UK company. For the majority of these people the original intention would be to earn a living abroad but return to the UK to retire, however, recent surveys have shown that this is no longer necessarily the case.

Due to the increasing cost of retirement in the UK and the taxable nature of UK expat pension member’s retirement income in the UK, an increasing number of expats that are working abroad are choosing to remain abroad in retirement. For UK expat pension members (ie members of UK pension schemes that are living abroad), overseas pension transfer advice is required to assess whether their funds should remain in the UK or transfer to a QROPS (Qualifying Recognised Overseas Pension Scheme).

The surveys have shown that 60% of expats abroad retire in Europe (with France and Spain being the most popular destinations), with the purpose of being close to their family. For other expats, the USA, Canada, Australia and New Zealand are the popular destinations – largely because they are English speaking countries. Wherever an individual retires overseas, though, they have to weigh up the better climate and quality of living against issues such as the standard of health care, emergency services and the tax system of their new country.

When funding for retirement, recent statistics have shown that expats look at their savings as the highest source of retirement funding with 27% coming from this source. The other major sources of retirement funding include the UK State Pension (23%), private pensions (20%) and rental income from property (6%).

What is surprising is that private expat pension funds makes up only 20% of retirement benefits. There may be QROPS options available that could increase pension provision for a UK expat pension member.

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Pension Transfer to Australia – Can I contribute to my UK scheme from Australia?

Thursday, December 31st, 2009

Often an individual, who is migrating to Australia, will contribute to their UK pension pre-migration – taking advantage of the UK tax relief on contributions – and then they would affect a pension transfer to Australia at a later date in order to take advantage of the Australian QROPS  tax benefits in retirement, in Australia.

As is the case on so many occasions, with the cost of migration increasing, most people do not have the spare funds to contribute to a UK pension pre migration – no matter what the tax breaks may be. This results in a UK pension transfer to Australia being completed without maximum advantage taken from UK tax relief.

For an individual already in Australia, whose proposed UK pension transfer to Australia is not underway, there may still be an opportunity to contribute to the UK pension.

If an individual is deemed to be a relevant individual ie has relevant earnings chargeable to UK tax in that tax year, is a crown servant abroad with earnings subject to UK tax (a diplomat or soldier, for example) or has been resident in the UK in that tax year (or any of the previous 5 tax years) – a contribution could be made to an existing UK pension.

Global QROPS Ltd would like to point out, however, even if the pension member is a ‘relevant individual’ it would still depend on the pension member’s provider as to whether the individual could still contribute. If the relevant individual has no UK earnings, the likelihood is that the UK tax relief on contribution would be restricted to £3,600 per annum (should the UK provider allow the contribution).

Pension members, migrating to Australia, should take advice from Global QROPS Ltd before regarding their additional contribution options.

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What is the QROPS Reporting Period?

Wednesday, December 9th, 2009

Any client that has completed a UK pension to overseas pension transfer would first have to have ensured that the receiving scheme was approved by the UK’s HMRC (Her Majesty’s Revenue and Customs) as a QROPS – which is a Qualifying Recognized Overseas Pension Scheme.
Beyond the actual transfer, the receiving QROPS scheme has a continued responsibility to behave as a UK scheme – when it comes to the payment of pension benefits – for the Reporting Period.
During this period the QROPS provider has an obligation to report to HMRC any income, annuity, lump sum or death benefits payments to the member (or member’s dependents) in respect of the fund. But for how long, after the UK pension transfer to the QROPS has been made, does the scheme have an obligation to report payments?
A QROPS provider has to report any payment as long as the QROPS member:
• is resident in the UK when the payment is made (or treated as made), or
• although not resident in the UK at that time, has been resident in the UK earlier in the tax year in which the payment is made (or treated as made) or in any of the five tax years immediately preceding that tax year.
In short, the Reporting Period is 5 complete tax years of the member’s overseas residency. A return to the UK, in that period, could lead to the ‘5 year clock’ starting again and the QROPS scheme continuing to distribute and report any payments, as per HMRC legislation.

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Will my Tax Free Cash increase by Transferring my Final Salary Pension to a QROPS ?

Friday, October 30th, 2009

When examining a transfer of a UK pension to a QROPS (Qualifying Recognised Overseas Pension Scheme), an individual would look at both the pros and the cons.
One element that is always of significant interest is the lump sum or tax free cash entitlement that a QROPS could provide. This is of particular interest for migrating members of a UK final salary scheme.
There are two common methods for providing tax free cash from a UK final salary scheme.
The first method of tax free cash calculation is, typically, a reduction of the promised pension, using a commutation factor, to provide a lump sum. This commutation factor varies from scheme to scheme, although is usually in the region of 15:1. ie every £1 of the promised pension given up provides £15 of tax free cash lump sum.
The second method, is usually a final salary pension scheme will provide tax free cash on top of a pension. This entitlement is commonly worked out by multiplying the fraction 3/80ths with each year of the member’s service and their final remuneration.
It is highly unlikely that a QROPS would use anything like these calculations for tax free cash as it is unlikely that they would be final salary schemes. Realistically, a migrant using QROPS would be looking at around 25% of their transferred funds (certainly within the 5 year QROPS reporting period) as a lump sum. Specialist QROPS advice would be required as this could be more or less then what is available from their existing UK scheme.

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When can I retire with my QROPS?

Thursday, October 15th, 2009

Qualifying Recognized Overseas Pensions Schemes (QROPS) have been able to receive transferred in money from a UK pension scheme since 6th April 2006.

 A common question from many people living abroad is, if I transfer from a UK scheme to a QROPS, when can I take my pension benefits?

The first point that an expat should do is take QROPS advice from a specialist that is aware of the UK legislation. UK legislation is key because for 5 complete tax years of a UK pension member’s overseas residency, the retirement age from the QROPS must be the same as that permitted under UK legislation. For a QROPS to release benefits to a member, in respect of their UK pension transfer funds, before the permitted UK retirement age (other than circumstances such as serious ill health), would potentially lead to the member incurring an unauthorised payment charge.

Significance of 6th April 2010 

From 6th April 2010, the retirement age from virtually all UK registered schemes (and QROPS) will be age 55. For members of overseas pension schemes whose date of birth falls shortly after 5th April 1960, they will have to wait around 5 years longer to access their UK pension benefits than someone born on or before 5th April 1960.

For those members of UK pension schemes or QROPS that are aged between 50 and 54 before 5th April 2010, advice should be taken as to whether benefits should be accessed now before the window of opportunity is delayed to age 55.

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