. . . GETTING THE MOST OUT OF YOUR RETIREMENT ABROAD
Have a personal pension fund/SIPP/Group personal pension/Stakeholder pension (income from these types of pensions is usually taxed at source under PAYE in the UK irrespective of your tax residency)
Have been or expect to become a non-UK resident for a minimum of 5 years
Want to start taking an income from your pension and have not yet purchased an annuity
Have total pension fund values that are likely to exceed the lifetime allowance (QROPS may offer effective tax planning as any future growth is not subject to the lifetime allowance charge).
You have deferred pension benefits from a previous pension scheme and you wish to consider your options
Live abroad and are worried about the tax payable on your pension fund on your death after age 75 (see below for more info)
Live abroad and are disappointed at being taxed automatically in the UK under PAYE on your pension income (QROPS income can be paid gross dependent upon the jurisdiction)
Live abroad and want to make sure that you are not paying too much tax on your pension income (Pension income receives favorable tax treatment in Spain, typically resulting in a 3% marginal income tax rate).
Live abroad and want to consolidate your different pensions and would like them to be managed by a qualified adviser
Live abroad and are ready to start drawing benefits from your UK pensions but need help to organise this
If ANY of the above statements apply to you, read on …
QROPS is terminology used to describe the UK guidelines on overseas pensions – Qualifying Recognised Overseas Pensions, sometimes also known as ROPS. QROPS just means that the overseas scheme has been approved to go on the HMRC list as it satisfies the criteria laid down to accept pension transfers from the UK. Anyone holding a pension scheme in the UK is able to transfer their pension to an overseas pension scheme if they live abroad, or are intending to do so in the future.
Why transfer to a QROPS?
People often have a number of reasons for transferring to a QROPS. It’s a decision that should be taken after seeking advice from an adviser qualified specifically on pension transfers to ensure that all aspects of your current and future situation have been taken into consideration, including the cost of transferring, any guaranteed benefits being given up, your current and future lump sum/income requirements and your tax residency (there are special tax breaks available to Spanish residents on QROPS income).
At Speed Financial Solutions we have an in-house qualified Pension Transfer Specialist who will oversee the advice provided to ensure that a pension transfer is in your best interest.
TAX CHARGE ON INHERITED UK PENSIONS – CLIFF EDGE AT AGE 75!
This is a major factor for retired expats, who unwittingly can end up leaving their loved ones in a worse financial position by not considering a move to QROPS.
DEATH BEFORE AGE 75
Type of Pension: Uncrystallised or drawdown UK defined contribution pension funds (typically personal pensions and SIPPs) or a joint life or guaranteed term annuity.
Income: Beneficiaries receive any future payments from such policies tax free where no payments have been made to the beneficiary before 6 April 2015. The tax rules have also been changed to allow joint life annuities to be paid to any beneficiary, again tax free if the pension holder was under age 75 at death.
Lump Sums: If the individual dies before age 75, the beneficiary will pay no tax on the funds.
DEATH AFTER REACHING AGE 75
Where the pension holder died after reaching age 75, the beneficiary will pay UK Income Tax on the pension income and/or lump sum at their marginal rate. This effectively creates a cliff edge at the age of 75 on UK pensions after which the tax-free benefits are lost.
From a QROPS, once you have been non-UK resident for 5 complete tax years, the whole fund can be passed free of UK tax. This is a massive benefit when considering the ‘cliff edge’ mentioned above, where the payment of benefits tax-free ends with UK pension schemes on death after age 75.
There are tax planning opportunities with QROPS for those intending to remain UK resident as any growth on your pension fund once transferred remains outside of your Lifetime Allowance, so offers a fantastic opportunity for wealth preservation, avoiding a potential Lifetime Allowance Charge of up to 55%!
Transfer to a QROPS is a benefit cystallisation event, where a final lifetime allowance check is completed upon transfer. No further lifetime allowance checks are completed. Any growth on your pension fund once transferred to a QROPS is not subject to the Lifetime Allowance Charge. This is another massive benefit to those who are in danger of exceeding the Lifetime Allowance.
SPANISH INHERITANCE TAX
As a Spanish tax resident the QROPS does not form part of your estate for Spanish Inheritance Tax purposes from inception.
As you can see, there are a number of reasons why many of our clients choose QROPS. Contact us today to find out if a QROPS is right for you.