Sep
16

Sep
16
Many clients ask if they should transfer their UK pension to a QROPS even if they think or know that they will return to the UK in the future. There are a number of reasons why a QROPS should be considered even for British Expats returning to UK:
As discussed in a previous article, a transfer to a QROPS is a Benefit Crystallisation Event and so tested against the Lifetime Allowance (currently £1.25 Million) on transfer. If you have a pension close to this level you should definitely consider a QROPS transfer in case this level is reduced in the future or further changes are made.
By concession, you will usually only pay tax on 90% of your foreign pension payments as 10% is exempt from tax.
As long as you have been outside of the UK for at least 5 complete tax years and you are 55 you can draw 30% from a QROPS instead of 25% from a UK scheme.
As discussed previously, there is a charge levied on your residual pension value passing to your beneficiaries when you pass away if you are over 75– currently 45%. The benefit of transferring to a QROPS is that this charge relates to the value of the pension when transferred to the QROPS – the relevant transfer fund. All subsequent growth of the pension is exempt from this tax. This can be a highly significant saving per the following example:
UK Pension | QROPS | |
Original Value | £300,000 | £300,000 |
Value at death of member over 75 | £600,000 | £600,000 |
Taxable Amount | £600,000 | £300,000 |
Tax at 45% | £270,000 | £135,000 |
Amount to Beneficiaries | £330,000 | £465,000 |
It is imperative that British Expats returning to the UK take financial and tax planning advice in advance of making that move. This will enable you to ensure that you are not opening yourself up to unnecessary taxation on return. Contact us today to speak to one of our specialist advisers and make sure that you are planning appropriately.
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