QROPS Case Becoming Stronger
The case for QROPS - Qualifying Recognised Overseas Pension Schemes - could become even stronger if Government proposals on pension reforms go ahead, according to Angela South, managing director of Expat Pension Providers Ltd.
"Whereas a lot of the Government's proposals are good news for those living in the UK with no intention of ever moving abroad, for those with plans for a retirement in the sun, the story is somewhat different," she pointed out.
She said that many UK citizens moving abroad will have taken particular note of the proposal that pensions passed on to relatives on death will be taxed at 55 per cent - described by the Government as "an appropriate rate to recover past relief given".
If someone with a pension dies before reaching 75 and has not withdrawn any money from their pension, the fund can be passed on tax-free. If the pension holder dies after 75 the fund will be subject to a 55 per cent tax charge.
Angela South said: "The new proposals promote 'flexibility' but as you might expect there is a catch.
"The Government is to allow up to 100 per cent of pension funds to be withdrawn directly into cash at any time after 55, with any money not taken on death being passed on to relatives.
"But this depends on pensioners being able to demonstrate that they will have sufficient income to support the rest of their old age, and will not have to rely on the State if they withdraw their funds."
As is the case now, the first 25 per cent of a pension can be taken out tax-free, after 55, but then any part of the fund converted into cash will be subject to ordinary income tax charges.
The UK Government has also said it will scrap the current requirement to purchase an annuity by 75. This is intended to allow pension savings to remain invested, accessed when needed and passed on after death.
Angela South said "While promoting greater flexibility, the Government has said it will set a minimum income requirement - MIR - if you want to take cash out of your pension.
"This effectively means that only the richest pensioners will be able to access all their money at once, while others will have to abide by an annual cap.
"We note that while a pensioner must be able to prove he has sufficient 'secure income', it should be stressed that only pension income qualifies."
The basic State Pension and additional State Pension in payment will therefore be considered towards the MIR.
"We wait with interest to see what level the Minimum Income Requirement is set at and whether there are different levels set for different age bands," said Mrs South.
"With the further proposals to increase the amount of tax payable on unused pension funds upon death from 35 per cent to 55 per cent, this will hit basic rate taxpayers hard."
She said that these proposals all added up to a stronger case for expats considering QROPS.
"Typically, if you move your pension fund into a QROPS, once you have been expat five full tax years, there is no tax charge, 35 or 55 per cent or otherwise, your funds are payable straight to your beneficiaries and there is no UK Inheritance Tax to pay.
"Obviously there is tax to pay in the country where you have made your home, but if your arrangements are set up correctly this can be as little as 3.4 per cent, taking Spain as an example.
"With a QROPS you can have a higher or a flexible income, make tax savings and also have control over the funds you invest in or opt for discretionary fund management if you so wish.
"In other words QROPS as a good idea, just became a better idea," she said.
Expat Pension Providers Ltd is an appointed representative of Financial Ltd which is authorised and regulated by the Financial Services Authority. Expat Pension Providers Ltd has the necessary passports to provide cross border advice within countries of the European Economic Area.
UK tax treatment depends on individual circumstances and may be subject to change in the future. You may still be liable to tax in accordance with the regime where you are resident. The FSA does not regulate tax advice.
For further information, please contact
Angela South, Managing Director,
Expat Pension Providers Ltd, 1a High Street, Astwood Bank, Redditch,
Worcestershire, B96 6DB.
0044 (0) 1527 894465, mobile, 0044 (0) 7515 699750.
Prepared and issued by Andy Skinner of ASAP PR, 0044 (0) 1527 892004, mobile - 0044 (0) 7990 978257.
Angela South is available for interview or can provide a regular column on a weekly or monthly basis as required. If interested, please call 660 618 916.
Press Release from Expat Pension Providers Ltd
Expat Pensions is Europe's leading authority on QROPS
