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International Pension Plan

The Warwick Global International Pension plan, through a QROPS (Qualifying Recognised Overseas Pension Scheme) will allow anyone with a UK registered pension who is living outside the UK, or is intending to leave the UK, to transfer their pension offshore.

Her Majesty’s Revenue and Customs (HMRC) introduced a number of changes to the UK pensions system from 6 April 2006. These changes included withdrawing the existing agreements for the transfer of UK pension rights to overseas schemes, which in effect meant that this would only be a possibility if the receiving scheme was recognized by HMRC as a QROPS.

While an individual is a UK resident, or has been for any of the past five complete tax years, the QROPS rules require benefits to be paid in line with those that could be paid should the funds still be held in the UK scheme.

However, once an individual has migrated and is no longer a UK tax resident for five full UK tax years, then it is the rules of the QROPS in its place of registration that apply.

International Pension Plan benefits at a glance:

• No Liability to UK Tax on Pension Income: A non UK resident drawing a UK pension remains subject to UK tax on the income, unless he or she resides in a country with a double tax treaty with the UK that contains an article on pensions. If the member resides in a country with no double tax treaty with the UK, they may be subject to a higher tax rate than the top rate of tax in their country of residence. Transfer to a QROPS ensures that, if tax is due on pension income, it will only be taxable in the country of residence.
• No Requirement to Purchase an Annuity or Alternatively Secured Pension: Members of UK registered pension schemes can currently defer taking their pension until they reach age 75. However, once the member turns 75, they must either buy an annuity to provide an income for life, or opt to take an ASP. Depending on the specific scheme rules, transferring to a QROPS may allow the member to continue to defer taking a pension beyond age 75.
• Ability to Leave Remaining Fund to Heirs: The standard UK pensions legislation significantly restricts the member’s ability to leave the pension fund to their heirs on death and there are major tax implications. Transferring the UK pension to a QROPS may allow the member to leave lump sums without deduction of tax to heirs.
• Currency Flexibility: A standard UK pension will usually only pay in Sterling. Transferring to a QROPS means that the pension payments can be made in the local currency, thus eliminating exchange rate risk.
• Investment Freedom A QROPS give access to investment links that are currently not available to a UK registered scheme. The most obvious example is a direct holding in residential property.
• No Lifetime Allowance Charge QROPS Members will no longer be subject to the Lifetime Allowance Charge. This is a restriction on the total permitted value of an individual’s total accrued fund value in UK registered pensions, currently £1.8m. Those who exceed this value face a potential tax liability of 55% on the excess funds on retirement.

International Pension Plan pitfalls at a glance:

Whilst there are sound reasons why a transfer to a QROPS is beneficial to individuals, there are several pitfalls you need to be aware of.

• Returning to the UK: If you return to the UK, the UK pensions legislation will apply to the scheme.
• Charges: Until recently the cost of the transfer and the management of the funds prohibited those with small pensions from utilizing QROPS. It is now cost effective for anyone to transfer into a QROPS. From as little as £25k can be transferred with no upper limit.
• Loss of Protected Rights; Transferring to a QROPS may result in the loss of certain protected rights, including contracted out rights, or rights accrued under a defined benefit scheme.