Newsletter

28-Jun-08 Pensions - Isle of Man – Overseas Transfer – QROPS

It was always too good to be true and unfortunately that is turning out to be the way for overseas transfers. QROPS stands for Qualifying Recognised Overseas Pension Scheme. Following Pension Simplification, HMRC dramatically simplified the basis on which transfers could take place to overseas schemes. Once an overseas scheme qualifies and has its registered number then there is nothing in the way of stopping any one transferring a UK Scheme overseas. Unfortunately, a lot of the press and website activity has been a little extreme and inaccurate to say the least.

For clients not resident now or those who intend to be non resident in retirement and later death, a transfer to an overseas scheme can bring with it significant advantage. Greater tax free cash, passing fund to family on death, and the possibility of investing in residential property can all apply.

As always it was not what is stated in the regulation but what is not stated that caused all the excitement. There is no doubt that the regulations as written provided potential for a UK resident to transfer pensions overseas and avoid significant taxes. There is no doubt also that this was against the spirit of QROPS, so it was more a question of how the Revenue would deal with these situations. I needed greater clarification, which the Revenue recently provided, in a very dramatic way. It is reported that all QROPS in Singapore have lost their registered status. Furthermore, those individuals that transferred legitimately to a Singapore QROPS, are now potentially facing a 55% tax charge on the value of their pension fund. I do not believe we could have clearer statement of intent from the Revenue than this.

I personally met with the Conservative Shadow Minster for Pensions, who assures me that it is the Conservative’s party’s intention to do away with many of the tax charges applicable on pension funds on death after age 75

Today for UK residents, I am therefore suggesting that no action is taken concerning transferring overseas until the next election or they have definite plans to retire abroad. For clients who are no longer resident in the UK or who are totally committed to being non resident in the UK in retirement, and possibly on death, then a transfer to an overseas scheme can have great advantage.