WOULD YOU LIKE TO RELEASE MONEY FROM YOUR UK PENSION? - QROPS v SIPPS
Despite the changes to UK legislation it is still possible to transfer your UK pension offshore in what is known as a QROPS (Qualifying Recognised Overseas Pension Scheme). However, for this to be possible it has to meet certain requirements set out by HMRC.
Following this year’s budget, HMRC has put a 25% tax on pension transfers to QROPS schemes but despite this there are still many benefits in taking out a QROPS. Firstly, you are allowed to take a lump sum free of tax when you have reached the age of 55 usually 25% but in certain circumstances it might even be 30%, depending on the length of time you have been living overseas.
You are then free to take as much money as you wish from your QROPS once the initial tax free amount has been taken. However, this is subject to UK taxes unless you have been overseas for a period of more than 10 years.
Also on your death you are allowed to pass the pot tax free to your named beneficiaries. In the UK depending on what type of pension you have, you could be taxed at a rate of 55% or even worse lose everything.
One of the biggest advantages of a QROPS is in the scope of investment choice.
Very often a UK pension has a very limited choice of funds and performs very poorly. A QROPS on the other hand offers the broadest possible selection of investments.
With a QROPS there is no requirement to buy an annuity.
If you leave your pension in the UK the annuity yields have been at historically low levels. However the yields with a QROPS are far higher.
A UK pension is subject to UK tax.
Even an average person could be subject to a 40% tax rate. However, if your QROPS scheme were to be to transferred to say Gibralter for example, even though you live in Thailand as a UK citizen you would only be subject to tax at 2.5%.
A big factor to consider is what happens if you have an annuity in the UK if you die. Depending how it has been set up this could mean that when you die the pension dies with you. However, with a QROPS, on death you can bequesth the entire amount left to whoever you want with no penalty.
An alternative to a QROPS is a SIPP ( Self Invested Pension Scheme ). In this situation your pension remains in the UK but the greatest advantage is that you have complete control over what you invest in. It could be funds, stocks and shares,ETFs ( Exchange Traded Funds ) or even property. Also there is no requirement to buy an annuity so as to make retirement options more flexible. Transfers from more than one pension are allowed to consolidate numerous plans under one roof.
25% can be taken tax free after the age of 55 The remainder can be taken if desired but is subject to UK taxes. Most pension plans are provided by insurance companies which generally do not have the best record for investment purposes as well as crippling high fees. SIPPs generally perform better and have lower fees attached.
To access your UK pension whilst living abroad the first thing to do is find out how much your pension is worth and what type it is. Also discover how many pensions you do have. Most of us change employment several times during our lifetime and many people have forgotten that they might have some tucked away. I can think of one particular example where we found a pension for someone which he didn’t know he had and it was worth £250000! That is what you call a pleasant surprise. Once this information is found out you are then free to decide whether to leave your existing pension where it is or transfer it to a QROPS or SIPP.
We are more than happy to offer free and impartial advice. Part of our service is to trace missing or forgotten pensions. If you are wanting to access the funds in your pension we can guide you through the procedure with the minimum of fuss but with the utmost professionalism.
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