Their main application as it has turned out over the last year or so has been to enable long term expats to release a capital sum from their UK pension fund.

Qualifying Non UK Pension Schemes (QNUPS) ironically exist as a consequence of legislation introduced to correct a mistake in the QROPS legislation. The outcome is so remarkable that some have suggested that the QNUPS provisions are so generous that they must be a mistake. We do not think this is right as the QNUPS legislation was drafted in mid 2008 and so there was 18 months worth of opportunity to adjust it to fit HMRC intentions.

QNUPS represent an Inheritance tax shelter first and foremost. These schemes (established as offshore pension trusts) are able to receive payments in cash or in the form of assets transferred into the ownership of the QNUPS. But as the QNUPS is a pension scheme the payments into it represent a fund that may of course be accessed.

This is not just about locking funds away for the next generation, although the assets that remain in the QNUPS following the death of the QNUPS member are outside of the deceased’s estate for Inheritance Tax purposes.

The key elements associated with QNUPS are as follows:

1. Unlimited contributions.
2. Unlimited fund size.
3. Complete investment freedom – the fund may be invested in property for example.
4. A QNUPS may receive a transfer in of UK pension funds via a QROPS providing the expat left the UK before 6 April 2005.
5. The assets in the QNUPS are immediately free from UK Inheritance tax.
6. The IHT free treatment remains even if the QNUPS member is a resident of or returns to the UK.
7. Lump sums may be paid to the member from the QNUPS.
8. Income payments may be paid to the member from the QNUPS.
9. The member can borrow from the QNUPS – the loan can be repaid from the member’s estate following death which reinstates the Inheritance tax protection.

We thought that QROPS when introduced represented a fabulous planning opportunity. Now we have QNUPS. In isolation or alongside a QROPS this takes the use of international pension schemes to a new level.

In reality this has little to do with pension provisions but everything to do with tax planning and wealth generation.

For further information about QNUPS and QROPS please contact Stephen Ward and Robert Burns via e-mail: review@qrops.es or see: http://www.qnups.com or http://www.qrops.es

Given the impending changes in UK pensions law to be introduced by the Coalition government this is a good opportunity to revisit the relative merits of using a UK Self Invested Personal Pension (SIPP) or a QROPS as a long term home for UK pension fund.

Why not leave it where it is?

This is the first question you may well ask. Well the answer to that one depends on where your UK private pension is currently held. If it’s a deferred (or “frozen”) pension in a final salary pension scheme the awaited new UK legislation will reduce the current “transfer value” by typically 10% to 30%. So if you know that the value of something is going to fall then surely now is the time to do something about it.

Do you know how much your fund is worth how it is invested?

If your UK pension is with a UK insurance company can you answer these two questions? If the answer to at least one of these questions is “no”, then you need to consider what you have and compare it to what is available – namely SIPPS and QROPS. As pensions experts first and foremost we can gather all this information for you and provide you with our free no obligation review.

The key differences between a SIPP and a QROPS for a non UK resident include:

1. A SIPP will generally be a lower cost option than a QROPS.
2. A SIPP will provide fewer investment options than a QROPS.
3. Upon your death, QROPS always allow the remaining funds to be passed on tax free to your named beneficiaries.
4. With a SIPP, any remaining funds upon death passed onto your beneficiaries attract a penal tax charge of 82 percent (soon to be reduced to 55 percent).
5. A SIPP restricts you to a single chance of taking a lump sum of 25% of the fund. New rules from April 2011 may allow you to take more as a lump sum but it will be taxed.
6. A QROPS can allow you to take up to 100% of the fund as a lump sum if you have been out of the UK for at least five complete tax years.
7. Income when drawn from a SIPP will be fully taxed here in Spain. 
8. Income when drawn from a QROPS will for a Spanish resident be taxed at no more than 2.6%, and this can be as low as 1.5%.

You will begin to see how it is that the extra cost of a QROPS is well worth it on consideration of the advantages that are delivered. But above all a QROPS takes you outside UK legislation once and for all and away from the risks associated with the ongoing meddling underway by the UK authorities.

The importance of advice from pensions specialists

For a free no cost (with no upfront fees) review of your pension fund from a leading QROPS and QNUPS independent pensions advisory firm please contact review@qrops.es or see http://www.qrops.es or http://www.qropsguernsey.com

We are finding that more and more of our cases are for clients wishing to cash in their UK pension fund via a transfer to a New Zealand QROPS. Providing that they have been a non UK resident for five or more tax years and the fund is greater than £10,000 then the answer to the question is yes, so long as they have not already bought an annuity. How old you are does not matter.

Perhaps it is not surprising that people want to do this as the average UK pension fund is under £30,000. This amount will not go far to meeting the traditional aim of providing an income for life (from the age of 65), in this case of say just £125 per month.

HOW DOES IT WORK?

Under HMRC rules and regulations a UK pension fund may be transferred to what is known as a Qualifying Recognised Overseas Pension Scheme or “QROPS”. HMRC keeps an updated list of QROPS that runs to over 40 pages. The first 10 pages alone relate to Australian schemes.

Many countries listed do not offer the facility to cash in a pension fund (such as Guernsey, Isle of Man, Gibraltar and Malta). This is because of the way the rules regarding pension funds work for residents in these countries. HMRC recognises transfers to these countries because they follow a certain set of rules. These schemes tend to be for funds in excess of £100,000 where the client is looking to protect capital and avoid the need to purchase an annuity.

However, there are several countries that do offer residents the facility to cash in a pension fund including Australia and New Zealand that are also recognised by HMRC because they follow a separate set of rules.

As Australian schemes are only open to Australian residents this excludes the majority of expats. Unlike her Australian neighbours, New Zealand legislation allows residents and non residents alike to transfer UK pension funds into a New Zealand QROPS. The New Zealand pension providers we recommend are recognised by HMRC and allow inward transfers from expats living outside New Zealand in say Spain.

For a detailed technical explanation of the way this works please contact us.

When does this not work?

This does not work for UK residents who do not satisfy what is called the five year reporting rule. Put simply, an expat must have been outside the UK for five or more complete tax years i.e. before 6 April 2005. We are aware of some advisory firms, usually unregulated who are allowing transfers to take place before this condition has been satisfied. In such cases HMRC will impose 55 percent tax on the gross transfer value. This will come as nasty shock to anyone who has been incorrectly advised.

A free review of your UK pensions Our clients come to us and recommend us to others. They recognise that we do not offer a solution from just one country (e.g. just Guernsey), nor do we profess to offer the best product from just one provider expecting this approach to suit all and sundry.

For a free no cost (with no upfront fees)review of your pension fund from a leading QROPS and QNUPS independent pensions advisory firm please contact review@qrops.es or see http://www.qropsnz.com or http://www.qrops.es