Managing Director, Carey Suen Will Services Limited
Many of us overseas have left behind a UK pension. We do not have to leave it and can gain more control over our wealth.
QROPS stands for Qualifying Recognised Overseas Pension Scheme. A QROPS can receive transfers of UK Pension Benefits without incurring an unauthorized payment and scheme sanction charge. The QROPS programme was launched on 6 April 2006 as a direct result of EU human rights legislation with regards to freedom of capital movement.
There are many benefits to being able to transfer your pension from the UK including the following:-
1) Control over investment risk - your current pension Trustee will decide on how your pension money is invested. Through QROPS, you can choose the risk and rate of returns accordingly, and change this as many times as you wish.
2) More money - you can take 25% of your retirement pot tax-free at retirement age with a UK pension and the balance is paid to you after deduction of income taxes throughout your retirement. With QROPS you can take 30% tax-free at retirement and very often, depending on where you place your QROPS, income taxes are mitigated (down to 2.5%) or removed altogether.
3) Avoid currency exchange rate fluctuations - depending upon where you want to retire will require currency variations in payments as your UK pension will come to you in Sterling. This can have a dramatic affect on your receiving income. QROPS can alleviate this problem.
4) Early Retirement - QROPS can be drawn down at 55 and not subject to UK compulsory retirement age of 65 (which is being extended to 67 if you retire from 2026.) You can take the full amount as a lump sum, tax-free if your life expectancy is less than a year before the age of 75.
5) Heirs - should you leave your pension in the UK and pass away, your spouse will not receive the same entitlement and any pension income would be taxed. Should you have a QROPS then you can leave ALL of the money to your loved ones without the worry of when and how, and the cost of taxes.
6) Lifetime Allowance - in 2006 you could hold GBP1,500,000 in your pension pot without a lifetime allowance tax ... this is extra on top of income tax. It was increased to GBP1,800,000 in 2010 but since then has dwindled down to GBP1,000,000. This tax is 55% for lump sums and 25% for income. Therefore, if your pension pot is likely to grow higher than this by the time you retire, you should move your money into QROPS whereby there are no such restrictions. ALL of the pot is yours.
7) UK Legislation - HMRC are forever changing the rules and regulations with regards to wealth in the UK. By moving into QROPS, you do not have to worry about these never ending amendments and be caught up at the last minute with added costs (taxes.)
The reason that all of these rules may change (again) is that HMRC mainly allowed QROPS due to UK's connection to Europe and the rules surrounding the freedom of movement of capital.
If UK will no longer be part of Europe anymore, why would HMRC keep QROPS? Article 50, when implemented could bring about further changes and provide us with less choices.
Even if you are likely to return to the UK someday but intend to be overseas for the majority, you should still consider moving your pension.
You have more control!
Retirement planning is a definitive part of estate planning and is very often at the bottom of the list of priorities - it is a long way away to consider. However, as we know, especially as we get older, that time goes fast and before we know it, retirement is upon us. Without planning in place, it can create serious financial problems.
Please feel free to contact me with any inquiries or concerns. I would be happy to help discuss your own arrangements and the comparison of choices.
+852 2542 2285 Direct