As an Indian national, if you have a pension in the UK, and have either left or are planning to leave the UK, moving your pension fund into a specialist QROPS can both maximise your tax relief and your income.
Qualifying Recognised Overseas Pension Schemes (QROPS) are the HM Revenue and Customs (HMRC) recognised schemes which can accept UK pensions. They give you superior tax and investment benefits from your UK pension compared to if you simply left your pot in the UK.
HMRC recently issued new guidance after a recent court case concerning a QROPS based in Singapore.
HMRC has now stated that it will never take legal action against QROPS transfers which took place pre-September 2008, unless “there is evidence relating to the transfer of dishonesty, abuse, artificiality or any similar circumstances”.
This has made the QROPS market much clearer. Now, individuals can rest assured that their pension transfer – so long as it adheres to the spirit of the legislation, i.e. used for its effective benefits to supply income for retirement away from the UK – will remain protected for the duration of their retirement.
With a QROPS, the benefits (compared to leaving your pension in the UK), are vast:
- 100% of your fund will be passed onto your loved ones when you die (and not minus up to 55% in ‘death taxes’ as in the UK).
- Your pension will not suffer any UK income tax.
- You receive a completely tax free lump sum of 30% (again, preferable to the 25% limit in the UK).
- NHS pension growth has been linked to the Consumer Prices Index, which grows at a very low rate of inflation. A QROPS will allow you to invest in one of the widest ranges of asset classes available, including corporate bonds, gold, stocks and shares and even cash – meaning you can benefit from much higher returns.
- The UK’s Lifetime Allowance – the maximum amount your pension can hold before you incur additional taxes – is currently set at GBP 1.5 million but will be reduced to GBP 1.25 from April 2014. By transferring your pension, you can protect your growing pension from these additional taxes.
- You can receive your pension income in many currencies, including rupees.
- With a QROPS, you are able to combine all your UK pensions into one larger, easier to manage plan, meaning you benefit from one fund which can mean much greater accumulated growth.
Which jurisdiction works best?
For individuals who are moving back to India, the Malta and Gibraltar QROPS jurisdictions offer security and stability, and offer varying benefits.
The main difference regards how large your pension pot is. A Malta QROPS means you pay one higher rate of tax in Malta, and a Gibraltar QROPS means two lesser taxes.
Ultimately, finding the most suitable jurisdiction for your needs will be based upon matching your unique circumstances to the right scheme.
A lot of this will depend on the experience of your advisor. QROPS Group has specialised in QROPS solutions for Indians for nearly half a decade, and contains specialist advisors who solely deal in these transfers.
This means by choosing QROPS Group, you’ll benefit from whole of the market, expert advice tailored to your needs.
Follow the link to be put in touch with a QROPS Group advisor