I contracted out of SERPS - am I able to transfer protected rights funds into a QROPS?
I am already taking benefit (“drawdown”) from my pension fund - can I transfer benefits that are in payment to a QROPS?
YES - so long as the QROPS provider is willing to accept it.
When the transfer takes place form CA 1881 needs to be completed to enable HRMC to keep track of where the protected rights are. In transferring protected rights it is necessary to state that you understand that all protection associated with UK pensions legislation is being given up.
Can residents of the USA transfer a UK pension right into an IRA?
YES - but only if you are receiving unsecured or alternatively secured income and the QROPS provider is willing to accept this transfer.
If you have not been a UK resident during the last five complete tax years the UK rules associated with these benefits do not apply. The UK provisions associated with these types of benefits apply until the five year rule has been satisfied. Annuities in payment and pensions in payment from occupational final salary schemes may not be transferred.
Can I purchase residential property with my QROPS fund?
PROBABLY NOT - QROPS status has significance for UK tax purposes only.
UK scheme administrators and members should contact the relevant overseas authority for confirmation. However, a possible solution is to transfer a UK fund to a non US based QROPS leaving the funds outside the USA.
Are there any circumstances in which I should not transfer to a QROPS?
YES - subject to conditions
A transfer to a QROPS becomes subject to the legislation associated with the jurisdiction to which the fund has been transferred. Some jurisdictions do permit investment into residential property although often only through indirect ownership via a corporate structure. If you have been a UK resident during the last five complete tax years you fail to satisfy the five year rule. Therefore, purchase of residential property within a QROPS would be subject to a tax charge typically seventy percent of the asset value.
How long does the process take?
YES - although in most situations we have come across associated with non-UK residents the arguments are overwhelmingly in favour of transferring UK pension rights to a QROPS.
However, some of the older pension plans have benefits such as guaranteed annuity rates that were set when interest rates were much higher than today. In those circumstances it may be better to stay put, however it is important to seek appropriate advice.
Which jurisdiction should I consider transferring to?
Allow a couple of months - occupational scheme transfers may take longer.
The process is initiated by asking you to complete a letter of authority and fact finder statement. This enables the most up to date information about your scheme to be obtained including benefits and transfer value. The correct discharge forms are also obtained should you decide to accept any recommendation to transfer to a QROPS.
Is an employment contract a requirement of a QROP?
Countries in which QROPS options are based include New Zealand, Guernsey and the Isle of Man.
It is important to look for strong investor protection principles which are similar to those associated with the UK.
Additionally, it is important to look for jurisdictions where, after the QROPS member has been non resident for five complete tax years, there is a significant improvement in the investment and benefit options available. For example, where there is no requirement to buy an annuity at any time.
As the market opens up to new entrants many more schemes are coming to the market. We have access to one of the largest selection of QROPS in the marketplace adding to our selection on a regular basis.
Contact us for the latest options available to suit your personal circumstances.
The fund I wish to consider transferring into a QROP is of substantial value. Are there any tax considerations on transfer that I need to worry about?
This depends on the particular circumstances of the member.
However, all the referrals we have made to date have been into arrangements that are like personal pension arrangements in the UK with no form of employment contract required.
Can I access the entirety of my fund as a lump sum following the transfer to a QROPS?
Consider registering for "enhanced protection".
A transfer to a QROPS will be a Benefit Crystallisation Event and so will give rise to a tax charge if the amount transferred exceeds the individual's unused lifetime allowance. This allowance, to which everyone is entitled, is GBP 1.65 million in the 2008/09 tax year. Thus before any transfer to a QROPS is finalised it is essential to check whether there is any possibility of this allowance being exceeded.
If yes, then registration for an "enhanced protection" should be put in place before transferring to a QROPS. This is a straight forward process and removes any possibility of an attack on the transfer
What are the costs associated with the transfer of a QROPS?
This depends on the circumstances.
A QROPS member remains subject to UK pension rules unless or until you have been non UK resident for five complete tax years. After this period all of the UK restrictions fall away unless you once again become a UK resident.
Access to the fund is then dependent on whether the jurisdiction associated with the QROPS permits this and the individual rules of the QROPS provider.
There may be taxation consequences in respect of this course of action depending on your country of residence at the time. It is important to seek appropriate advice as each individual's circumstances may be different.
Can I transfer the assets held within my UK registered pension scheme into a QROPS without first liquidating them into cash?
This depends on individual circumstances, the nature of the benefits and the QROPS chosen.
Previously, the cost of setting up a QROPS was between 0.8 % and 1% of the transfer value of the fund subject to a minimum cost of £2,000. Additional annual charges were often between 0.65 % and 1 % of the value of the fund again subject to a minimum cost of £2,000 per annum
However, as the market for QROPS opens up many more schemes are becoming available at more cost effective prices thus opening the market to those with a little as £50,000 in their pension funds. Typical annual costs can vary between £300 to £500 for a scaled down QROPS fund.
We are now seeing new schemes with set up costs capped at £1,500 and a fixed annual management charge of £1,750 making it much more viable for larger funds.
One off advisory fees are payable only upon successful completion of a transfer to a QROPS and are dependent on both the size of the fund and individual circumstances.
As the QROPS market opens up these developments are very welcome. We expect to see these new entrants put pressure upon the initial players who will eventually have to modify their prices.
If the assets are held within an insurance company based scheme then the funds in which you are investing will be converted into cash, and the transfer to the QROPS will be in cash.
If your existing registered pension scheme is a SIPP or a SSAS then it may be possible to transfer the existing assets to the QROPS, if the receiving scheme administrators or trustees are willing to accept them.