Savings & Investments

QROPS

What are the benefits of transferring my pension?

QROPS Benefits & Charges

Moving a frozen UK pension into a QROPS has the following principal advantages:

No Requirement to Purchase an Annuity or Alternatively Secured Pension

With a QROPS, there is no necessity to buy an annuity at retirement, as there is with UK pensions. Annuities currently only pay around 4% pa gross and are subject to UK tax. Additionally, in the absence of an annuity, the risk of losing the fund on early death is removed. If a retiree purchases an annuity for £1,000,000 and dies the day after, all that capital is lost to the annuity company.

No Liability to UK Tax on Pension Income

With QROPS, pensions are paid gross and, depending on the jurisdiction the retiree lives in, can legitimately avoid paying tax on the pension

No Lifetime Allowance Charge

QROPS members are no longer subject to the Lifetime Allowance Charge. This is a restriction on the accrued pension fund value an individual can have in the UK. It is currently set at £1,800,000.There is a potential tax liability of 55% on any excess.

Ability to Leave Remaining Fund to Heirs

UK pensions legislation significantly restricts a member's ability to be able to leave a pension fund to their nominated heirs on death. If a member is already drawing an unsecured pension (i.e. no annuity has been bought) prior to age 75, the remaining fund can then be paid as a lump sum to their heirs, less a tax charge that is equal to 35% of the lump sum received. If, however, the member dies after age 75 while in an ASP, then a lump sum paid to heirs is potentially liable for inheritance tax at a current rate of 40%.

The payment can become liable to an authorized payment charge, an unauthorized payment surcharge and a scheme sanction charge, which can result in some situations a total tax liability equal to 82% of the fund value.

QROPS can help to transfer pension funds between family members. Transferring a UK pension to a QROPS may then allow a member to leave lump sums to their heirs without any deduction of tax.

Ability to re-base currency

The pension currency can be re-based to the pension-holders own currency of residence, thereby removing exchange rate risk

Greater Investment freedom

The fund growth can be boosted through investing in "open-architecture" QROPS schemes which have a much wider investment choice. As a result clients gain access to investments that are currently not available to a UK registered scheme, including physical property.

More flexible retirement age

Pensioners have greater control over their retirement age under QROPS - they can choose to retire within the 55 to 75 age range without consent of the former employer or trustee.