A large number of British citizens emigrate to New Zealand every year; a country where the largest Ethnic group by far is European. According to 2006 figures, almost 70% of New Zealand’s population gave their ethnicity as European. Furthermore, out of that 70%, the vast majority are from the UK.
UK citizens are attracted to New Zealand because of the climate, the fact that it is an English speaking country, the culture, low crime rate and tax advantages. By transferring your UK pension to an approved New Zealand QROPS pension, you can save a tremendous amount in tax.
Anybody with a private pension or occupational pension can transfer their pension to New Zealand if they are thinking of living there or if they have already made the move. However, you will not be able to transfer a state pension or a pension where you already receive an annuity.
In comparison with UK pensions, which attach high rates of taxation, any withdrawals that you make from a New Zealand pension are tax free, but your pension fund is taxed according to growth. Transfers to QROPS in New Zealand are also tax exempt and you do not have to pay inheritance tax. However, if you have had your QROPS for less than 5 years you will still have to report any withdrawals to HMRC. As with other countries, tax rules in New Zealand are subject to change but your QROPS advisor will be able give you details of current regulations.
The UK rules relating to pensions changed in 2006 and since that time UK citizens have been able to transfer their pensions to an overseas pension scheme providing that the scheme is approved by HMRC and recognised in the country where the scheme is based. As this ruling is relatively new, many expats are still unaware of the benefits of being able to transfer their pensions abroad.
Apart from the tax advantages, your pension fund will have a larger choice of investments so growth rates are likely to be higher. Additionally, you won’t have any problems associated with exchange rate fluctuations or currency charges, which you would have if you were withdrawing from a UK pension.
If you want a wide selection of QROPS, New Zealand currently has more than 60 QROPS schemes appearing on the HMRC QROPS list. This means that these QROPS schemes have been approved by HMRC and are also regulated in New Zealand for tax purposes. So, people wishing to live in New Zealand can feel confident in transferring their UK pension.
The providers listed on the HMRC QROPS list are not the only companies offering pensions in New Zealand, but it is important to stick to approved schemes to avoid paying excessive amounts of tax to HMRC. A UK based QROPS advisor will provide information on the various approved pension schemes available in New Zealand, and will be able to answer any questions that you may have.
Are you looking for a flexible answer for your pension problems? If so why not consider a QROPS? As an expat you may have left an old pension behind in the UK without really considering that it may be possible to transfer it to an overseas scheme.
The reason that most people consider a QROPS is usually tax. By transferring the scheme outside of the UK into a HMRC approved scheme, the pension can be removed from the UK free from UK income tax. The pension assets that you have accumulated when you die can even be transferred to your beneficiaries free from UK inheritance tax.
Freedom to invest wherever you want
If you do decide to go down the QROPS route you may have to check that the scheme is actually one that has been checked and verified by HMRC. Most of the approved schemes are on their website, but some may not be.
A quick glance at the HMRC list reveals that there are over 1,000 schemes for you to choose from. Accordingly, you have access to a wide range of options spread in countries around the world.
Not only can you choose the country that you wish to invest in (as your QROPS does not have to be based in the same nation as you), but you may also find that you have a wider range of underlying assets for your QROPS to hold.
Freedom to take benefits
Whilst you may not be able to take a lump sum from a QROPS before the age of 55, when you are allowed to take one you may be able to take a larger amount than is permitted in the UK. You may also be able to have more flexibility about when to take an income.
A QROPS may also be an opportunity to consolidate a number of pensions into one place, which may offer the chance to maximise the tax advantages that such a scheme offers.
Part of the attraction of QROPS is tax efficiency. After all, who wants to pay more tax in a country where they no longer live?
But there is more to QROPS than tax efficiency. Another attraction of a QROPS is the freedom they offer investors.
To be approved as a Qualifying Recognised Overseas Pension Scheme, a foreign pension arrangement must be regulated and taxed as a pension in its own country. This does not mean that the rules have to be the same as the UK’s.
What this means in practice is that savers have an opportunity to escape UK tax which may also be an opportunity to escape the UK pension regulations that do not appeal to so many investors.
First, you may find that QROPS offer more flexibility in terms of the underlying assets you can choose to underpin your pension. Not only are there a number of regulatory systems to choose from (so you can shop around for a country that permits pension investment in assets that the UK does not allow), but you will also have the choice of more than a thousand approved QROPS which are run by a diverse range of providers – you would literally have the world’s marketplace to choose from.
UK SIPP members have become used to the freedom to choose and manage their own pension assets, but even they may find that a QROPS gives them more discretion about what they can put into their pension scheme.
When it comes to taking money out of your pension, the rules depend on the country of your QROPS host. Australian and New Zealand based schemes are typically more relaxed about accessing lump sums, if that is your priority. Alternatively, you may be seeking to avoid the UK’s compulsory requirement for an annuity by your 75th birthday. This requirement sees people forced to buy an income bearing product at a time when they may not be ready – or indeed when they may not want to purchase one at all.
If you are an expat who is interested in getting hold of your money when you want it, talk to a Qrops adviser about your options. They can scour the international market on your behalf for a product that will deliver what you want.
There are definite advantages to transferring from a SIPPS to a QROPS if you are thinking of moving abroad. Before we discuss the advantages, however, we will outline the similarities and differences between the two types of pension schemes.
SIPPS stands for a Self-invested Personal Pension, which differs from a private pension plan because it gives more flexibility to the pension fund holder in terms of investment potential. SIPPS providers will often give guidance to the pension holder about suitable investments, which may include a portion of conventional funds to minimise risk.
SIPPS are subject to HMRC rules and restrictions. These stipulate that you can withdraw from your pension fund from the age of 55, you can take a tax free lump sum of up to 25% and you have a lifetime limit of £1.8 million. If you exceed this limit, you will have to pay income tax. When you reach the age of 75, under current ruling, you are required to purchase an annuity. This means that you will not be able to leave the majority of your pension fund to your dependants. Recent proposals have been put forward to change the rules relating to annuities, but it is not certain yet whether these will be acted on.
Like SIPPS, QROPS offer a wider range of investment opportunities than other UK private pensions, and the retirement age is 55 with some being 50. However, QROPS pensions are targeted to people living abroad or planning to live abroad. As QROPS schemes are set up overseas, they therefore have a number of additional advantages over SIPPS schemes.
With QROPS pensions there is no lifetime limit, and taxes are usually lower, which is one of their main attractions. This is the reason that many people chose to set up QROPS pensions in countries where taxation rules and rates are more favourable. Thus, there is a high demand for Guernsey QROPS and New Zealand QROPS, for example.
Additionally, the tax free lump sum that applies to QROPS pension holders is up to 30%. There is no requirement to purchase an annuity so you can leave your remaining pension fund to your dependants. This will be free from inheritance tax, whereas with a SIPPS scheme, your relatives or beneficiaries would have to pay tax on any sums that you leave.
Another advantage of a QROPS pension is that because it can be based in the country where you chose to live, or another country with the same currency, you do not miss out if there are currency fluctuations. You will also not have to pay currency charges every time you exchange your British pounds for the currency of the country where you are situated.
A qualified QROPS advisor will help you to set up a QROPS pension overseas and will have access to information relating to the thousands of schemes available worldwide. He will also be able to offer advice regarding the most suitable schemes for you and the associated benefits.
QROPS pensions have increased in popularity since April 2006 when new laws regarding pensions took effect. These changes to pension requirements now permit UK pension holders to transfer their pensions abroad, if they live outside the UK or are intending to do so, providing certain stipulations are met. Overseas pensions that meet the requirements are known as Qualifying Recognised Overseas Pensions Schemes (QROPS). In relation to QROPS, HMRC have set certain guidelines, as follows:
- Your current pension must be either a private pension or an occupational pension as state pensions do not qualify
- QROPS apply to people who plan to live abroad for at least five years as prior to this period any pension withdrawals must be reported to HMRC
- If you have already purchased an annuity (normally required after the age of 75) you will not qualify for a QROPS
- You can take up to 30% out of your pension fund as a tax free lump sum but the remaining 70% must be used to provide an income from your pension. In some occasions this can be more
Not all overseas pension schemes are recognised as QROPS schemes and the pension providers must apply to the UK Government for a pension to be given QROPS status. HMRC publish a QROPS list of recognised schemes, which you can view at the HMRC website, However, not all QROPS schemes appear on this list as some providers prefer not to publish their details. The HMRC QROPS list is also regularly updated, and your QROPS advisor will be able to let you know which QROPS schemes are currently available.
Apart from meeting HMRC guidelines your QROPS pension must be recognised by Government tax officials in the country in which it has been set up. If this country is other than the one in which you reside, then you may also be liable for taxes in the country where you are living. However, because some countries that offer QROPS pensions have very low rates of tax, your overall taxes can still be substantially less than you would pay in the UK.
Should you require any information or explanations of the rules applying to QROPS, your QROPS advisor will be able to provide guidance. There over a thousand QROPS schemes available worldwide and your QROPS advisor will be able to recommend the right one to suit your personal circumstances.
If you are considering transferring your UK pension overseas then you need to ensure that your new pension is a Qualifying Recognised Overseas Pensions Scheme (QROPS). This means that it meets certain criteria set by HMRC as well as being recognised for tax purposes in the country where the QROPS pension is set up.
To establish a QROPS pension you should be living overseas or intending to live overseas for at least five years. If you return to the UK before the end of this five year period you will have to pay high amounts of tax to HMRC. The maximum age for QROPS transfers is 75 and if you have already bought an annuity through your pension then you will not qualify for a QROPS. (there are some occasions when a transfer after an annuity is possible, speak to the adviser about your case)
The age at which you will be able to start making withdrawals from your QROPS pension is 55. (in some jurisdications the retirement age is lower, but these have strict rules to follow and may not be suitable for everyone)
Even if you are not yet near retirement age, you can still transfer your pension to a QROPS scheme providing you are living or intending to live abroad. In fact, you can do this from as young as 18. QROPS pensions offer a wide range of investment opportunities so the sooner you transfer your pension overseas the more your pension fund is likely to increase in value by the time you retire.
If you have decided on a QROPS transfer then you will also have to decide the best place to take out your QROPS pension. There are many places with great tax benefits as well as other incentives, so Guernsey QROPS or Isle of Man QROPS would be a good investment. It is worth taking into account that you do not have to reside in the country where you have set up your QROPS pension.
HMRC publish a list of QROPS pensions and this is known as the QROPS list. Schemes that appear on this list have met with the requirements set out by HMRC. However, not all overseas pension products appear on the list. This is because new QROPS providers are constantly coming onto the market and also because some providers choose not to appear on the QROPS HMRC list. A QROPS advisor will be able to supply details of all of these providers.
The first step in arranging a QROPS transfer is to consult a professional QROPS advisor. It is not possible to arrange your own QROPS transfer as QROPS pensions are a specialist niche. Because QROPS are such a specialist field even a lot of pensions advisors do not have the expertise necessary to advise you about QROPS transfers. A QROPS advisor will be able to arrange the whole process for you as well as giving you guidance on the best places to transfer your UK pension. He can also give you advice regarding your own personal circumstances and tell you which QROPS schemes are most suited to your needs.
If you are planning to leave the United Kingdom for at least 5 years, do you want to continue paying UK income tax on your pension?
If not, you should consider a QROPS. Depending on your circumstances, a QROPS could offer you a low tax or tax free retirement.
QROPS are foreign pension schemes that have been approved by HMRC for the transfer of UK pensions. They are only available for the transfer of private pensions. Your state entitlement cannot be transferred.
Your ability to transfer your pension into a QROPS depends on the rules of your UK scheme. If you have already started drawing benefits from the pension, you may find that the scheme may not permit you to transfer the remaining money or assets to another arrangement. However, your QROPS adviser can look into the rules of your UK scheme and let you know whether a move is possible.
Another consideration of course is the investment risk. For most people with a defined contribution scheme, a QROPS adviser should be able to scour the market for a similar or hopefully a better deal than your current one.
However, if you have a final salary scheme, your QROPS adviser may conclude that you would be unlikely to find such a “gold plated” deal anywhere else in the world.
Once you have decided that a QROPS is worth pursuing, your QROPS adviser will conduct a review of your current scheme and assess your risk profile, together with your appetite for various investments. Given that there are over one thousand approved QROPS to choose from, your QROPS adviser should be able to find one that suits any investor who walks through the door. So whether you are prepared to consider an unusual, high risk product with the potential for a high return, or whether you are more cautious and traditional, there will be a QROPS out there to suit you.
Our QROPS advisers have helped many investors free their pension from the UK taxman. After a thorough investigation of your circumstances, we can start shopping for the right pension for you.
Looking for a QROPS adviser
If you are looking for a QROPS adviser, how do you choose the right one for you?
A specialist
QROPS are highly specialised products. Not only are pensions complicated enough, but overseas pensions that meet HMRC’s complex criteria for tax exemption are even more involved. The consequences of making a mistake are severe (and potentially very costly). Accordingly, if you want to get a QROPS, you may like to make sure that your adviser is experienced not only with pensions but overseas pension planning.
Independent
Your QROPS adviser should ideally be someone with access to all of the QROPS that are on the market at the time that you are looking. After all, why miss out on a good deal simply because your adviser is tied to one particular provider? An independent QROPS adviser can pick and choose according to what suits you, rather than what suits the bank or insurance company that they are connected to.
Well connected
One of the advantages of using a QROPS adviser that is part of a large network of professionals is that they have the bargaining power to negotiate the best deals available on pensions. If you consider the issue from the point of view of the QROPS provider, you are much more likely to offer a discount in fees to someone who places hundreds of thousands of pounds worth of pension assets with you per year than to someone who you have heard from for the first time who want to talk about just one scheme.
There is also the issue of what would happen if you move around in your retirement. Would a small one man band have the global reach to support you if you decide to move around to another jurisdiction, for example? These are important considerations to take into account when choosing your QROPS adviser.
UK links
Finally, your QROPS may be governed by the government in which it has it is based, but its status may be affected by any change in the HMRC rules. Accordingly, it may be handy to use a QROPS adviser with links to the United Kingdom, so that they would be aware of any changes in HMRC outlook that may affect your pension.
