Below are some of the most frequently asked questions we receive regarding QROPS Pensions. If you have a query that is not answered below or you would like additional information, don't hesitate to get in touch with one of our expert advisors.
1. What is a SIPP-QROPS ?
A QROPS-HMRC Approved 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 Her Majesty’s Revenue & Customs (HMRC) with information on certain ‘events’.
2. How are SIPP-QROPS-HMRC Approved structured?
A SIPP-QROPS-HMRC Approved is structured in a similar manner to a UK pension; i.e. there is an investment vehicle which is owned on your behalf by a pension administrator (trustee). This trustee must be based outside the UK and approved by HMRC as a SIPP-QROPS administrator.
Through the investment vehicle you can access a wide range of cash, bond, property, hedge, equity and commodity funds - and switch between these funds as market conditions change.
3. Should I transfer my pension to a QROPS-HMRC Approved?
If you are moving or are already residing abroad, with no intention of returning to the UK, then a QROPS-HMRC Approved may well be the best course of action.
However, if you have no intention of residing abroad but are simply trying to circumvent the rules that would apply to a UK registered pension, then The Overseas Pension is not for you.
4. Which jurisdiction should I choose for my QROPS-HMRC Approved Transfer?
The Pryce Warner International Group QROPS-Qualified Recognised Overseas Pension Scheme is available in Malta, a juridiction that is fully approved by Her Majesty’s Revenue & Customs (HMRC). This location is strictly regulated and provide our clients with well regulated and tax efficient solutions.
5. Who can move their pension into a SIPP-QROPS-HMRC Approved ?
Anyone who has been living overseas for 5 years or more ,or who intends to live outside of the UK for more than 5 years and who has a UK ‘onshore’ pension scheme. As such, 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.
Individuals who have not been non UK resident for 5 years can also apply for a SIPP-QROPS-HMRC Approved if they believe they not going to return to the UK within 5 full tax years of leaving.
6. Can I transfer my UK pension when benefits are already in payment?
It is possible to transfer a pension where benefits are in payment provided that they are not from an annuity or certain company pension schemes.
7. My pension has a large proportion of Protected Rights - can I move these into a SIPP-QROPS-HMRC Approved?
Yes. However, in certain circumstances it may not be advisable to do so.. Protected Rights often have far more favourable terms than standard pension benefits so we would strongly recommend speaking to us before transferring protected rights. If an individual does decide to transfer protected rights, disclaimers will need to be signed to confirm the policyholder understands the potential implications.
8. When can I take the pension benefits?
Technically, you can take the benefits from the day of transfer. However, virtually all of the investment vehicles will have a minimum term of 5 years (unless you have less than 5 years to retirement). It is important to point out at this point that the money being transferred has been set aside for your retirement and we would strongly recommend leaving a large portion of the pension value in the SIPP-QROPS-HMRC Approved until you reach retirement.
9. What is the minimum transfer I can make into a SIPP-QROPS-HMRC Approved ?
There is no minimum level. However, it may not be efficient to transfer a single smaller pension into a SIPP-QROPS-HMRC Approved. We can advise on the most efficient vehicle based on the size of your pension ‘pot’ and the length of time you have until you retire. Generally the minimum is 50,000 GBP
11. Is there any Taxation on the Transfer?
A transfer of a registered pension scheme to a SIPP-QROPS-HMRC Approved 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 Pryce Warner International Group before proceeding.
12. My UK pension is IHT protected - is a SIPP-QROPS-HMRC Approved ?
At present, no. However, in the Pre-Budget Report delivered by the Chancellor of the Exchequer on 9 October 2007, it was announced that IHT “protection” is to be extended to UK tax relieved pension’s savings held in overseas pension schemes. The change will be backdated to have effect from 6 April 2006
13. Can I return to the UK after taking the benefits?
Yes, you can return without prejudice. If you return to the UK then the transfer will have a neutral affect as UK pension regulations will apply to the QROPS-HMRC Approved. However, to ensure there is no taxable event, we would recommend staying offshore until the next tax year begins.
14. What happens if I return to the UK before taking the benefits?
Yes, you can return without prejudice. However, to ensure there is no taxable event, we would recommend staying offshore until the next tax year begins. The SIPP-QROPS-HMRC Approved administrator will have to report this ‘event’ to HMRC and the pension scheme will become subject to UK pension regulations again. If the administrator does not do so, they will lose their approved status - if you do not inform the administrator, you are breaking the law.
15. What happens if I transfer to an international pension that isn’t a QROPS-HMRC Approved?
There are serious tax implications if the scheme turns out not to be a QROPS-HMRC Approved, including unauthorized member payment and surcharge, as well as a scheme sanction charge.
The scheme sanction charge is 40% of the transfer value payable by the pension scheme. The unauthorised payments surcharge is 15% of the transfer value and would be payable by the individual.