Source - Brian Furzer - Spectrum IFA
Recently there have been a number of changes regarding QROPS which could affect anyone reading this post, so you need to review your pension provision!
Many of the problems for expats have been caused by legislation in the UK, which didn't take into account pension holders who were still undecided about what to do with their pension pots left in the UK and as things stand, tax generating measures have been strengthened in the last budget, which leaves those people at a disadvantage.
In summary, any QROPS transfers requested on or after the 9th March 2017 will be subject to a 25% tax charge, unless:
- The QROPS is in the EEA and the Member is also resident in a EEA country.
- The QROPS and Member are in the same country or territory.
- The QROPS is an employer sponsored occupational scheme, overseas public service pension scheme or a pension scheme established by an international organisation.
For these measures, the EEA includes Gibraltar, (which is considered part of the EU as a part of the UK) and they take effect for any transfer from a UK Registered Scheme requested from 9th March 2017. The Member must also have provided the Scheme Administrator with all the required prescribed information before the transfer is made. And, if the QROPS holder loses qualification within five years of the date of his QROPS (which would be after 9th March 2017) then there will be a tax charge of 25% of the fund transferred.
Until around 1980, people wishing to make extra provision for retirement could do so through their employers (final salary scheme) or a self-employed personal pension scheme (a section 226a) which was at that time a 'with profits deferred annuity' pension. Companies were able to offer a 'cash fund on retirement' and with annuity rates around 19%, these became hugely popular. There was also no tax within pension funds and tax allowances on contributions were favourable and straightforward.
Enter Gordon Brown as Chancellor of the Exchequer! Brown introduced tax on dividends paid into pension funds thus producing billions of pounds in revenue for the government. Brown allowed pension schemes to become self-regulating - this affected final salary schemes thus lifting the cap on pension payments. Prior to this legislation the maximum pension payable to Fred Goodwin the retiring chief of the Royal Bank Of Scotland would have been £150,000 but the actual pension paid was significantly larger. This applied to many other major pension schemes thus allowing the 'fat cats' to benefit at the expense of everyone else.
QROPS schemes were introduced in order to allow expats to manage their own pension schemes abroad and this has proved an excellent benefit, providing the right choice of QROPS providers made and the investments are appropriate.
Pensions have continued to be manipulated by government legislation. They are subject to the vagaries of the Exchequer and the holder of a UK pension is not in total control of their fund. The only way to gain complete control of your pension fund is to transfer to QROPS but it is absolutely essential to establish if it is the right choice.
I have been dealing with pensions for over 40 years and during that time I've met numerous people who have been given bad advice which has put them at a financial disadvantage. Don't be one of those people! Contact me Brian Furzer (The Spectrum IFA Group)
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