Two common types of UK Pensions Transfers

1. i) QROPS – Qualifying Recognised Overseas Pensions Schemes

Since the introduction of QROPS in 2006 they have become an important financial planning tool for anyone with accrued rights in UK pension schemes that plans to live overseas. When used appropriately a QROPS can confer multiple benefits to the international investor, a summary of which are shown below.

Often a QROPS is appropriate for an investor that intends to live for the majority of the foreseeable future outside the UK. * Specific advice must always be sought before proceeding with pension transfers.

Here is a useful link to the UK Government website explaining more about Recognised Overseas Pensions: https://www.gov.uk/government/publications/list-of-qualifying-recognised-overseas-pension-schemes-qrops

1. ii) SIPPS – Self-Invested Personal Pension Schemes

These are HMRC approved UK pension schemes that allow investors to have access to the full range of investment assets allowed within a personalised pension plan. The investor has access to assets such as cash, bonds, shares, managed funds and other specialist funds.

Often a SIPPS is appropriate for an investor that intends to live for the majority of the foreseeable future in the UK. * Specific advice must always be sought before proceeding with pension transfers.

Some Benefits of QROPS

Since the majority of our clients at Wealth Management Group (Global) are expatriates or international investors we will examine here only the benefits of QROPS. Please contact us to explore whether A QROPS or a SIPPS may be appropriate in your specific circumstances.

Here are some major benefits of QROPS:

• A powerful Estate Planning Tool.
  A principle benefit of a QROPS is the fact that it is written within a TRUST that can have beneficiaries named such as the owner and the next of kin. In this way a pension can continue to generate income for spouse and dependants long after the death of the pension member. This benefit alone can be of immense value to the family.
• Inheritance Tax savings
  In these days of high property prices, more and more people are finding that Inheritance Tax will be due on their estate after their death. The Trust structure of a QROPS offers valuable tax planning benefits to the investor’s family.
• Substantial tax-free initial lump sum.
  Whilst the primary purpose of a pension is to provide income in retirement, a substantial lump sum is often required when making the transition into retirement. A QROPS offers this option.
• Protection from changing rules regarding the Lifetime Allowance
  For larger pension pots that are approaching (or exceed) the Lifetime Allowance, it is beneficial to have the fund tested at the time of the transfers. This may well shelter assets that might otherwise have been taxed.
• Income Tax benefits
  Income from a QROPS is taxed in the country where the QROPS is domiciled. This can often confer significant income tax advantages. * Specific advice must always be sought before proceeding with pension transfers.
• Investment Freedom
  Once a pension fund has been transferred to a QROPS, the investor then has complete control and immense freedom to invest in a vast array of investment assets. Whilst this can provide an excellent opportunity to have the pension managed in accordance with the investor’s specific wishes it can also bring with it an important risk. The investor should assess whether he truly understands the responsibility of managing his pension funds and in most cases we would strongly recommend a selection of top-class managed assets designed to produce steady growth.
• Consolidation of historic pension rights
  It is not unusual for our clients to have accumulated pension rights from 2, 3, 4 or even more previous employers in the UK. This can make keeping track of one’s pension rights quite tricky.
  In addition to that, many previous employers might have merged with other companies or even gone bankrupt. Keeping track of benefits under these circumstances becomes even more complicated.
  Furthermore, many pension providers have merged, changed their name or ceased to exist over the decades.
  The task of keeping up to date with multiple schemes, from multiple previous employers managed by multiple pension providers is hugely complicated. This is compounded when all of the above may have changed multiple times. How do you keep track under these circumstances?
  Imagine now for a moment that the spouse of the deceased pension member is attempting to unravel these pension rights, decades after the employment took place and often from a different country of residence.
  Imagine too that if the pension holder has re-married then perhaps the new spouse is not even aware of any previous employment history. Under these circumstances it becomes nigh impossible to establish what rights exist let alone establish a claim to those rights.
  We have first hand experience of some complicated cases taking a year or more to sort out, even with the benefit of the pension member being alive and involved. In order to avoid sometimes hugely complicated paper trails we always advise expatriates to consider whether their pension rights are clear and in order, so that their loved ones can be protected. Our experience can help investors through this maze.
• Enhanced Spouse’s pension
  Once a QROPS has been established and is being used to provide income, then it is possible for the surviving spouse to continue to receive the same income even after the member’s death. This is far preferable than the norm with UK pensions that often provide a spouse’s pension of just 50% of the member’s pension.
  Similarly, the assets within the Trust can pass down through the generations to children and grandchildren instead of ceasing on death as would often be the case with a UK pension.
• Preferable Income tax position on death
  Once a QROPS has been established for a number of years then the assets effectively fall outside of the scope of the UK taxation system. This can confer substantial benefits to a surviving spouse when compared to an immediate income tax charge if the arrangement had remained within the UK.

Although the above is a compelling list of benefits it is by no means exhaustive. There are indeed additional benefits that may accrue in certain specific cases but space constraints here make a complete list unnecessary. As stated above, in each and every case where a client is considering a pension transfer it is essential to take detailed advice first.