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QUALIFYING RECOGNISED OVERSEAS
PENSION SCHEMES(QROPS)
www.taylorbrunswickgroup.com
WHATEVER YOUR AGE
WHEREVER YOU LIVE
YOU WILL WANT TO MAXIMISE YOUR ASSETS AND OPPORTUNITIES
WHEREVER YOU LIVE
“YOU ONLY HAVE TO DO A VERY FEW THINGS RIGHT IN YOUR LIFE SO LONG AS YOU DON’T DO MANY THINGS WRONG”Warren Buffet
QUALIFYING RECOGNISED OVERSEAS PENSION SCHEMES
(QROPS)
o5
There is an alternative for your UK pension funds. Imagine a
fully regulated overseas pension scheme which provides you:
• More pension to you, in retirement
• Tax efficiency during your life and on your death
• The widest possible investment choice
• Flexibility to change the currency of your pension funds
• A scheme designed for your Pension Funds, with full
recognition of relevant UK rules
Taylor Brunswick aims to help you understand whether a
QROPS may be correct for you. Anyone with a UK pension
scheme who lives outside of the UK, or planning to leave the
UK, can benefit from moving their pension. We understand
that every individual has a unique set of circumstances and
this solution is not for everyone.
Historically your UK Pension would have many layers of
restriction and regulation, forcing you to purchase an
annuity on retirement and losing the residual value on death.
Typically these pensions have been trapped in the UK.
In 2006 the UK HMRC announced that UK pension holders
living outside of the UK, would be allowed to transfer their
pension funds into a QROPS. A QROPS would have to meet
certain requirements laid out by the HMRC. The scheme must
be regulated as a pension scheme and recognized for tax
purposes in the country where it was established.
QROPS typically allow considerable flexibility, a higher level
of income, excellent tax benefits, and greater freedom in
terms of currency and investment than a typical UK pension.
WHAT IS A QROPS?
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BENEFITS OF A QROPS
Higher levels of Pension Commencement Lump Sum and
annual income
No requirement to purchase an annuity
Unused pension benefits left to your beneficiaries, reducing
the need to pay 55% on death.
Greater investment control
Currency flexibility
Tax efficient income drawdown
Avoid future HMRC / Inland Revenue claims on your
pension funds
Consolidation of smaller pensions
If you are living abroad, the benefits of having investment
and currency control of your pension funds are priceless.
What is the minimum value of pension funds that can be transferred?We would advise that your pension
funds need to be valued at £50,000
or greater.
If I transfer my UK pension, will I need to buy an annuity? Ever?No, if you transfer into a QROPS, there
is no requirement whatsoever to
purchase an annuity at any stage of
your retirement.
Can I move more than one my pensions into the QROPS?Yes, a major benefit is that you can
consolidate all of your UK Pension
funds into one scheme.
FREQUENTLY ASKED QUESTIONS
What type of pensions can I move?Occupation pensions, including final
salary schemes, private pensions, and
defined contribution pensions with
protected rights can all be transferred
into a QROPS. Unfortunately it is not
possible to transfer a UK State Pension
or annuities or occupational pensions
where benefits have been taken.
Where can I invest? Are there any restrictions?The investment choice will be very
wide, however, it is not possible to
hold property or physical assets within
the QROPS.
What happens to my pension funds on death?The remaining pension funds will
be passed on to your beneficiary.
There may be a tax liability but that
would depend on your residence
and circumstances.
How long does it take to transfer my pension?No, if you transfer into a QROPS, there
is no requirement whatsoever to
purchase an annuity at any stage of
your retirement.
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My pension fund is substantial, what tax implications will there be?More and more UK pension plans will
become subject to this extra tax charge
(@25%/50%) when benefits are drawn
in the future, because of the reduction
in Standard Lifetime. Allowance (SLA) to
£1.5m.With the SLA expected to reduce
further (in real terms at least) in the
coming years, this tax charge will affect
many more people with UK pensions.
In contrast, upon transfer to a QROPS
such as Select, benefits are tested
against the SLA only at time of transfer,
so if the fund subsequently grows in
Select in excess of the SLA, there is no
subsequent lifetime allowance charge
(as benefits are deemed to have already
crystallised at date of transfer).
What happens if I return to the UK?None of the growth earned after
transfer to the QROPS is subject to
the normal 55% tax charge on death
and the 55% charge that does apply is
levied against a much smaller amount.
The pension will not be taxable in the
UK whilst drawing if you live abroad.
When can I draw the pension if its in a QROPS? There is considerable flexibility and
usually benefits could be started from
55, in some cases it may be earlier.
Why do I need to complete the Letter of Authority?The LOA enables your adviser to ask
your pension provider for the current
benefits and transfer value. This
information will be used to analyze
your overall current pension benefits
and best option. The LOA does not
allow us to make any changes to
your pension.
Mark lives in the UK and is retiring at age 60 with a UK Pension
fund of £400k. His twin brother John lives in the Far East and
will retire there with a pension fund of £400k after transferring
his UK Pension fund into a QROPS seven years previously with
a value of £266,000.
Mark’s UK pension income is capped at 100% of ‘GAD Tables’.
Mark can drawdown his pension at an annual rate of £19,600
which is equivalent to an annuity income level.
John has invested his pension into a portfolio of funds chosen
by Taylor Brunswick. This portfolio has produced an average
return of 6% per annum over the past 7 years. Assuming this
6% return continues, John can draw an income from his
QROPS of up to £30,500 per annum.
Case Studies
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Mark and John both retired at 60 with their £400k pension funds, Mark has a UK Pension fund and
John has a QROPS. If they both decided to draw the same income of £19,600 per annum from the
age of 60, and their funds grow through investment returns at 5% per annum after charges, their
residual funds at the age of 75 are identical at £398,000 when they pass away.
Mark’s pension is subject to 55% tax, equivalent to a tax charge at source of £218,900 and his
beneficiaries will inherit a residual fund of £179,100.
John died abroad, so his pension funds are not subject to UK tax. His children will receive the full
fund value of £398,000.
If John had returned to the UK, prior to his death, his QROPS fund would have been subject to 55%
tax. This charge would only be levied on the initial transfer value of £266,000 reduced by the total
pension payments. As he has drawn for 15 years at £19,600 per annum, a total of £294,000, this
would mean that there is no tax charge on the £398,000 QROPS fund which would be passed to his
beneficiaries.
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Case Studies
About Taylor Brunswick
Taylor Brunswick is a collection of experienced and driven
industry professionals who are bringing the standard and
quality of onshore financial advice, offshore. The client-
centric approach based on a set of fundamental servicing
principles coupled with award winning technology has
drastically improved the quality of service clients have been
receiving in the offshore market.
We pride ourselves on delivering the very best service to our
clients and using our expertise to offer customised advice. We
take the time to build a strong relationship with our clients
and to understand their needs, which allows us to provide
intuitive and advantageous client-focused service.
This QROPS Guide aims to help you understand Qualifying
Recognised Overseas Pension Schemes and whether they
may be the right choice for you. We understand that every
individual has a unique set of circumstances and our free UK
Pension review becomes invaluable in helping you source
expert advice and further guidance, whilst also helping you
determine whether a QROPS is right for you.
The Taylor Brunswick Group is a fully authorized financial
services company, regulated by the Hong Kong CIB and a full
corporate member of the HK IFAA.
The HKCIB is a body of insurance brokers, approved by the
Office of the Commissioner of Insurance to implement self-
regulation of insurance brokers in Hong Kong under the Hong
Kong Insurance Companies Ordinance.
Our consultants hold a wide range of qualifications from the
United Kingdom, United States and Hong Kong, including
Chartered Accountants, CISI, CII, FPC, SEC and the Hong
Kong CIB.
Our flagship office address is based in
the centre of Hong Kong.
20/F, Central Tower
28 Queens Road
Central, Hong Kong
Tel: +852 2159 9655
Fax: +852 3010 4191
Email: [email protected]
www.taylorbrunswick.com
This article is based on Taylor Brunswicks’s interpretation of the law and HM Revenue & Customs practice as at January 2014. We believe this interpretation to be correct, but cannot guarantee it. Tax relief and the tax treatment of pensions may change. 17
Our Expertise
Taylor Brunswick Group20/F, Central Tower
28 Queens Road
Central, Hong Kong
Tel: +852 2159 9655
Fax: +852 3010 4191
Email: [email protected]
www.taylorbrunswickgroup.com
