Introduction
Following the changes introduced by the Finance Act 2004, there are now less restrictive rules on transferring pensions rights overseas from UK registered pension schemes. The changes were part of the intended simplification of the previous pensions tax regime, and compliance with EU court decisions and the EU pensions directive.
The three main circumstances where an overseas transfer would occur are:
• When individuals who migrate (or intend to migrate) from the UK wish to transfer their UK pension funds to an overseas pension scheme (either in or outside the EU), and
• When returning nationals return to their country of citizenship
• Where UK residents have personal circumstances where they may benefit from arranging their pension affairs in another jurisdiction.
Principles
A transfer of rights overseas is feasible, provided it is to a qualifying recognised overseas pension scheme (QROPS). Many are listed on an HMRC website at:
www.hmrc.gov.uk/pensionschemes/qrops-list.htm
Opportunities
The new rules governing the transferring of pensions overseas can give some migrating individuals significant advantages (such as mitigating currency risks). Appropriate design of a QROPS arrangement can result in tax efficient retirement planning on the pension fund, in accordance with HMRC requirements and without aggressive tax planning.
100% of the fund is available to the surviving spouse, then children, and there are significant benefits for Inheritance Tax Planning.
Pensions can be consolidated into one and there is no obligation to purchase an annuity.
The protected rights portion of the pension fund can be integrated into the main pension cash.
Conclusions
QROPS within the EU may in due course prove particularly advantageous even to those who have no intention of moving overseas as well as ex-pats.
The new international pension planning rules offer significant opportunities (especially to those moving overseas), to reduce management costs and improve the nature of benefits and choice of investments.
Useful references
http://www.hmrc.gov.uk/PENSIONSCHEMES/faqs.htm
http://www.hmrc.gov.uk/PENSIONSCHEMES/qrops-list.htmhttp://www.hmrc.gov.uk/pensionschemes/ps-newsletter36.htm
http://www.pensionsadvisoryservice.org.uk
Whilst we have endeavoured to ensure that the information on this fact sheet is correct, we do not warrant its completeness, accuracy or relevance to individual circumstances. Legal or other appropriate professional advice should be sought before making any investment decisions.
Ross
Pays is the Chairman of The FAA based in Cyprus. FAA offer advice on wills,
tax registration services, home, health and car insurance and tax planning, including Inheritance Tax Planning, together
with full accounting services.
Visit Ross Pays website at www.rosspays.com, Telephone 00 357 25 82 58 76, Fax 00 357 25 33 35 93 or
e-mail ross@rosspays.com
Initial consultations are free and no obligation and
fee quotations will be provided in advance for all services.
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