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Offshore Money…

Offshore Money…

Time for a fresh look at your UK pension?

Jerry Dingley,
Director, Capital Partners International Ltd.

Up until recently, the options for those living overseas with Pension funds locked up in the UK were extremely limited.

Before 2006, the millions of UK citizens and individuals of different nationalities from around the world who had accumulated substantial lump sums in private or company pension schemes had no facility to move those funds when they later decided to become non resident.

There was no regulated and approved option that allowed for the transfer of UK Pension Funds to an overseas scheme which was recognised by Her Majesty’s Revenue and Customs (HMRC). This meant that monies were trapped in existing schemes and bound by their rules, or transferable only to other onshore UK plans. The result was an inflexible, unfriendly tax environment for what are obviously an important part of most peoples’ long term finances.

Pensions “A” Day in the UK, enacted via new legislation in 2006, that made provision for those living overseas to move their accumulated pension money into more flexible arrangements offshore that reflect a “non-resident for tax purposes” status, and with the full endorsement of HMRC. The official name for this part of the Act became known as ‘QROPS’ or Qualifying Recognised Overseas Pension Scheme.

In most cases the benefits of doing so can be significant:
* Leave the accumulated fund intact for dependants
* No requirement to purchase an annuity
* No liability to UK tax on income taken
* Early retirement option and 25% lump sum cash withdrawal
* Flexibility of investment choice

The QROPS option can help UK expatriates and other nationalities who have emigrated and who now live in many different countries and jurisdictions around the world; for example France, Spain, Malta, Cyprus, Hong Kong, Singapore, Malaysia, Jersey, Isle of Man, Guernsey, India, China, Canada, Ireland, Israel, Thailand, Dubai, South Africa, Switzerland, Monaco, United Arab Emirates and others.

It cannot be overstated, however, that each and every jurisdiction and QROPS Trustee granted approval by the UK authority to administer these transfers must strictly follow the HMRC procedural guidelines. There have been several incidences where this has not been the case and the consequences have been severe, often resulting in the imposition of large tax penalties on the entire pension amount.

It should be noted that QROPS transfers are not right for everybody

You cannot transfer a state pension into a QROPS, nor can you transfer your pension if you have already started taking income from an annuity. In addition, there are some quality defined benefits and final salary schemes offering specific long term guarantees which would make a transfer to any other scheme ill advised. Examples of this are nurses, police and some quality blue chip corporate ‘final salary’ arrangements, but in the majority of cases, there are significant advantages for those who qualify for the QROPS system.

People with international lifestyles have individual requirements and no two expatriates’ needs are exactly the same. You may be dividing your time between different countries, retiring abroad, temporarily moving overseas to develop your career, or perhaps working in a foreign country while retaining your main residence at home.

Whatever your situation, a change of location brings many challenges as well as opportunities and a professional financial review now can result in maximizing pension benefits and opportunities for many years to come. All UK Pension holders of any nationality already living overseas or planning to move, would be well advised to examine their own position and pension transfer options.

This article was contributed by the partners of QROPS Pension Centre and IFA International Ltd. See www. and / or email [email protected] for more information.