Malta QROPS schemes – the ideal QROPS solution for Indian residents
QROPS Adviser Group advises Indian residents, or people who intend to retire in India, to transfer their UK pension to an overseas QROPS scheme based in Malta. In this article we examine the reasons why Malta QROPS are only real viable solution for UK pension transfers to India.
Malta – a highly regulated, specialist QROPS jurisdiction
Malta is unique in terms of QROPS jurisdictions in that when they drafted their QROPS legislation, they consulted with the HMRC at a very early stage to ensure that they approved of the rules that were put in place for UK pension holders wishing to transfer their pension from the UK to a scheme in Malta.
As a result, Malta QROPS benefit from a highly regulated jurisdiction with a flexible, but recognised, pension structure – and equally importantly, members can take comfort that the scheme has been ‘blessed’ by HMRC and will not suddenly be de-listed.
All retirement schemes in Malta are governed by the Special Funds (Regulation) Act 2002, which states that applications must be clearly specified and accompanied by a trust deed or scheme document.
Malta QROPS scheme administrators are regulated by the Malta Financial Services Authority (“MFSA”), which includes regular compliance visits, quarterly and annual reporting and the requirement for audited financial statements.
Moreover, Malta is a full member of the European Union, and as such benefits from strict levels of investor protection and regulation.
100% pension flexibility for residents of India
By transferring your UK pension to Malta, you can benefit from the flexi-access rules introduced by the UK government. Malta is the only QROPS jurisdiction in the world to offer this benefit. Therefore, from the age of 55, a scheme member can access their entire pension pot, and spend or invest that pot as they wish.
Indian QROPS schemes do not benefit from this flexibility – Indian pension scheme members (including Indian QROPS members) must purchase an annuity with their pension fund, and Indian pension rules do not allow for flexible access to a member’s pension.
Of course, we would not necessarily recommend that a client withdraws their entire pension fund, as the idea of a pension is still to provide an income in retirement for life. However, the flexibility is there, and the funds will be available as and when the member needs to draw upon them.
Avoid purchasing an annuity
For Indian residents, transferring your UK pension across to Malta avoids the requirement to purchase a low returning annuity, as is required under Indian pension rules. There are 2 distinct benefits of avoiding the need for an annuity. Firstly, you can avoid locking in permanently to low investment returns.
Secondly, and even more significantly, you can pass on your entire remaining pension corpus to your loved ones after you pass away, whereas with an annuity, usually a much reduced sum is available for the beneficiaries of an annuity contract.
Double taxation agreement with India
In February 2014, India signed a Double Taxation Agreement with Malta which ensures that all pension income arrives in India completely tax free, without any withholding tax deducted in Malta. No other QROPS jurisdiction offers such an advantageous tax regime.
Pass on pension to loved ones
Pass on the complete value of the pension corpus on death – your pension will have grown in value substantially between the date of transfer, until death – thus leaving a much larger sum to pass on to your loved ones. This passes on to the beneficiaries in India completely free of tax.
30% Tax free lump sum
Malta QROPS schemes allows members to take a larger tax free lump sum (30%) than is allowed under the UK pension rules (currently 25%). However, it should be noted that this benefit is of less relevance today, given that Malta’s pension flexibility allows members to take up to 100% of their pension fund at retirement.
There is complete investment flexibility within the QROPS regime in Malta, which allows for personal investment objectives and preferences to be met in full. For example, if you wish to invest in Indian investment funds, for example, this option are available.
QROPS Adviser Group will construct a low risk, diversified investment portfolio individually for each client, which exactly matches their long term investment and retirement objectives.
Avoid paying UK death taxes
Whilst death taxes in the UK were reduced by the UK government in 2015, death taxes will still need to be paid if the scheme member dies after the age of 75, and this will be charged at the marginal income tax rate of each beneficiary – in effect up to 45%. By transferring your pension across to a Malta QROPS, you can avoid these death taxes altogether.
Avoid future changes to UK pension legislation
By transferring your UK pensions to Malta, your pension is permanently out of the jurisdiction of UK rules, and subject to the more flexible regime of Malta. As we saw in 2014 when the UK government decided to impose a ban on NHS pension transfers
If your personal circumstances change, or in the unlikely event that legislative changes mean that there is a better jurisdiction to set up a QROPS pension, then the flexible nature of the Malta QROPS regime mean that you can simply transfer the QROPS to another jurisdiction with the minimum of fuss. This level of flexibility is not available with Indian QROPS schemes, where once you have transferred your pension to an Indian QROPS scheme, there is no possibility to transfer to another scheme or jurisdiction.
Access your Malta QROPS pension in any currency
When you want to start to draw down a pension income, you are not restricted to receiving your pension in British pounds, or Indian Rupees, but in any currency you wish, depending on where you are residing at that time.
For more information about transferring your UK pension into a QROPS scheme in Malta, please contact us for a FREE, no obligation consultation.