uk pension release (qrops)

Until recently it was not possible to transfer a UK pension to another country. This is because, in return for the tax-relief received on your pension contributions, Her Majesty's Revenue & Customs (HMRC) makes it compulsory to purchase an annuity with 75% of the pension's final value regardless of where the pensioner retires in the world. Any residual value on the pensioner's death is collected by HMRC rather than being passed to the deceased's estate.

Today, with the permission of HMRC through a Qualifying Recognised Overseas Pension Scheme (QROPS), it is possible to move your pension offshore and benefit - without the compulsion of purchasing an annuity.

What is a QROPS (Qualifying Recognised Overseas Pension Scheme)?

A QROPS is a recognised overseas pension scheme that meets certain requirements. The rules of the scheme must be broadly equivalent, in terms of tax treatment, to a UK registered pension scheme and the scheme manager must provide HMRC with information on certain 'events'.

However, if the QROPS is administered in a country where there is no stipulation on how retirement benefits are taken, it is possible to transfer the benefits to an international pension where the pension's value can be withdrawn after the age of 50 without any tax deducted at source. For an expatriate therefore, there is no obligation to buy an annuity.

Who can move their pension into a QROPS?

Anyone that holds a UK pension scheme who intends to live outside of the UK for more than 5 years, or who has been living overseas for 5 years, is eligible. Therefore, this scheme applies as much to Australians, New Zealanders and South Africans (and any other nationality) who have worked in the UK as to British expatriates.

What is the minimum transfer I can make into a QROPS?

There is no minimum level. However, it may not be efficient to transfer a single smaller pension into a QROPS, generally the minimum is 50,000 GBP

Is there any Taxation on the Transfer?

A transfer of a registered pension scheme to a QROPS is a benefit crystallisation event (BCE). This means it will give rise to an additional income tax charge where the transfer exceeds the individual's lifetime allowance. Currently, this allowance is set at £1,500,000. Below this amount there is no taxation at transfer. Anyone with a pension fund larger than £1,500,000 who is contemplating such a transfer should obtain specialist advice from Falcon Gulf before proceeding.

Can I return to the UK after taking the benefits?

Yes, you can return without prejudice. However, to ensure there is no taxable event, we would recommend seeking our advice before returning to the UK. Contact us for impartial advice on whether it would be in your best interests to transfer you pension benefits overseas. Any transfer of pension benefits would be directly from your existing pension provider to the QROPS provider authorised by the HMRC