Transferring your UK Frozen Pension Offshore
On Pensions “A” Day, 6th April 2006 a number of substantial changes came about in the treatment of UK personal pensions, particularly for UK Expatriates. Since that day it has been technically possible to transfer frozen UK pensions offshore, and subject to certain restraints, create an offshore pension that is subject to the Pensions Rules and Taxation in the country of one's residence, not those of the UK.
As with everything the UK Inland Revenue does, it’s a complex process that requires a lot of paperwork and the completing of many forms. In summary however, the process allows expats who remain non-resident from the UK for five years, revised access to the value of their frozen UK occupational pension schemes. Until now, pension scheme owners have only been able to access 25% of their pension fund, with the balance being used to buy a lifetime annuity of some type. A replacement offshore scheme must still be used to create an income for retirement, but up to 30% is available as a lump sum, and in certain jurisdictions, the income should be available tax free. A further benefit of this QROPS approach is that if a pension owner should die, the value of their fund would be added to their estate, rather than just expire with the owner’s death.
The basic principle of the QROPS exercise is the transfer of the frozen UK pension into an offshore equivalent scheme that has been approved by the Her Majesty’s Revenue & Customs (HMRC). The complexities of QROPS arise from the manner is which the scheme is approved and constructed, but this is all transparent to the client. Whilst there is an lot of paperwork to be completed at the outset (with the assistance of his advisor) once it is done, its simply a matter of waiting and making occasional reviews and adjustments to the investment strategy. |