By Dr Graham Brown, Forth Capital
Many clients ask if they should transfer their UK pension to a QROPS (Qualifying Recognised Overseas Pension Scheme) even if they think or know that they will return to the UK in the future. There are a number of reasons why a QROPS should be considered even if you are planning to return to the UK:
1) Avoiding Lifetime Allowance Charge
As discussed in a previous article, a transfer to a QROPS is a Benefit Crystallisation Event and so tested against the Lifetime Allowance (currently £1.25 Million) on transfer. If you have a pension close to this level you should definitely consider a QROPS transfer in case this level is reduced in the future or further changes are made.
2) Reduced UK Income Tax on Foreign Pensions
By concession, you will usually only pay tax on 90% of your foreign pension payments as 10% is exempt from tax.
3) Increased Pension Commencement Lump Sum (“Tax Free Cash”)
As long as you have been outside of the UK for at least 5 complete tax years and you are 55 you can draw 30% from a QROPS instead of 25% from a UK scheme.
4) Increased Payments to your Beneficiaries
As discussed previously, there is a charge levied on your residual pension value passing to your beneficiaries when you pass away if you are over 75– currently 45%. The benefit of transferring to a QROPS is that this charge relates to the value of the pension when transferred to the QROPS – the relevant transfer fund. All subsequent growth of the pension is exempt from this tax. This can be a highly significant saving per the following example:
Author's bio
Dr Graham Brown has over 30 years’ experience in the Financial Services Industry throughout Asia, the Middle East and Europe. Working for a number of major Financial Institutions including Old Mutual, Credit Lyonnais and Jardine Fleming, Graham has vast experience in managing an array of diverse businesses. Graham joined Forth Capital in 2012 to set up and manage the Hong Kong subsidiary.
Graham specialises in pension transfers, inheritance tax planning and all aspects of personal finances. Having been an expat throughout the last 30 years, Graham has a strong understanding of the expatriate market and an array of personal experience.
Graham is UK qualified, with a Level 4 Diploma in Regulated Financial Planning and is a registered Chief Executive with the Hong Kong Confederation of Insurance Brokers and registered with the Hong Kong Securities and Futures Commission as a Responsible Officer. Graham holds a BSc and PhD in Marine Biology.
Qualifications
- UK FSA Level 4
- HK SFC Investment Adviser
- HK CIB Technical Representative
- HK CIB Chief Executive
