UK Pension Transfer
There are a number of options available to holders of UK pensions, these are QROPS, IORPS and SIPPs.
What’s a QROPs?
A QROPS (Qualifying Recognised Overseas Pension Scheme) also known as a ROPS, is an overseas pension scheme that meets HMRC’s conditions to accept transfers of previously accrued UK pension benefits to a scheme offering flexibility, tax efficiency and multi-currency options.EUI Private Wealth have a number partners with licensed and regulated who are on HMRC’s register.
Our partners are based in politically stable EU Member States who have double taxation agreements with more than 70 countries and and operate in a highly respected regulatory authority.
The double taxation agreement network means that in many situations, pension benefits are paid without the deduction of any local taxation. However, personal situation circumstances may differ.
We can offer both trust and contract based QROPS to suit the individual needs and tax profile of individual members and offer free in-house transfers between the plans.
Contract based pensions are an important development in the international market as the use of trust based pensions can trigger additional reporting and, in some cases, taxation for individuals living in many non common law jurisdictions.
Transferring accrued pension benefits is a complicated and ever-changing environment and it is highly recommended that independent financial and tax advice is taken before any transfer takes place – and in certain situations, it is a mandatory requirement for UK FCA regulated advice to be given.
What is an IORP?
Occupational pension funds in the EU benefit from the principles of free movement of capital and free provision of services. This freedom is supplemented by rigorous prudential standards, ensuring that pension fund members and beneficiaries are properly protected.
The manner in which the EU achieves this is through Directives 2003/41/EC & 2016/2341 which regulates the activities of all Institutions which avail of these freedoms in relation to Occupational Pensions.
The combination of maximum flexibility and rigorous prudential standards means an IORPS is an ideal mechanism for the management of your retirement benefits.
IORPS meets HMRC’s ROPS conditions and can accept transfer from any UK regulated pension structure and will follow QROPS rules on drawdown.
Who should consider a pension transfer?
EU nationals residing / working in the UK
EU nationals with existing UK pensions
UK nationals with existing UK pensions who are highly mobile with their employment
UK nationals considering retiring to an EU country
Anyone residing outside the EU that have accumulated UK tax relived pension funds through previous employment but a transfer to a new overseas scheme would trigger the 25% overseas transfer charge. One of the exemptions is if the transfer is to an occupational pension scheme and the member is an employee of a sponsoring employer under the scheme.
Benefits of transferring a Pension to Malta – one of our preferred jurisdictions.
Access your pension at 50 years of age. Any UK tax relieved funds i.e. a transfer of an existing UK structure to Malta must follow QROPS rules on drawdown i.e. from age 55.
Funds can however be split within the IORPS with drawdown available on non UK contributions from age 50.
- No Fund Cap
- Access to a wide range of investment opportunities – regulated & unregulated
- Tax Efficient – Malta has over 70 Double Tax Treaties (DTT), for residents of countries that have a DTT with Malta.
- 30% tax-free lump sum available – This is higher than the current UK tax-free lump sum of 25% ( UK pensions capped at £250K tax-free lump sum).
- No Tax to pay on assets within scheme (with exception of immovable property in Malta).
- Can nominate beneficiaries on your pension
- No Lifetime Allowance Charge.
- Inheritance benefits – you can pass on your pension pot to your beneficiary upon death Inheritance Tax free.
- You can combine various smaller pensions into one large pot resulting in only one annual management fee as well as the opportunity to benefit from the economies of scale by combining investment.
- Avoid ongoing currency exchange fees by investing in the same currency as the country you reside in or in any currency of your choice.
- Availability of IORPS occupational scheme pension structure as well as ROPS option.
- Seamless & efficient transfers when transferring from a UK occupational scheme to a Malta > Competitive & easy to understand fee structures.
Pension Transfers from one Defined Contribution scheme to another Defined Contribution or Personal Pension are reasonably straightforward because you are moving a pot of money from one pension provider to another pension provider offering the same type of scheme.
However, there are three key things to consider.
- The charges (costs) – are the charges higher or lower than the scheme you’re considering transferring away from and how much will it cost to make the transfer? There may also be exit penalties to consider.
- Investment risk – the level of risk of the pension fund you are currently invested in and the fund or funds you’re considering investing in. Are they suitable for your appetite for risk?
- Guarantees or ‘safeguarded’ rights – does the existing scheme provide any guarantees like bonuses or a guaranteed annuity rate which is income at retirement? Losing these may be very costly.
Transferring benefits from a Defined Benefit pension scheme to a Defined Contribution or Personal Pension is a completely different exercise. By definition, you are giving up certain guaranteed benefits in favour of benefits that are not guaranteed. The benefits will rely on future investment returns, charges and inflation.
You should be very cautious about transferring benefits from a Defined Benefit pension scheme and we recommend that you avoid firms who are actively promoting the idea of doing this. However, there may be specific reasons or circumstances that mean a DB transfer would make sense.
For example, your health and the death benefits, whether you have any dependants, when you want to retire, how much the lump sum benefit might be and what other income or assets you have available for your retirement.
However, you need to fully understand the options and risks as well as the potential benefits