QROPS pension flexibility for Indian residents
As of 5 April 2015, a resident of India who is a member of a Malta QROPS scheme can access 100% of their pension pot from the age of 55.
The UK government has announced (via a Statutory Instrument published on 19 December 2014) that it will offer full pension flexibility to QROPS schemes. This follows on from the new flexible pensions regime introduced for UK pensions in the 2014 Budget.
The requirement to use 70% of the QROPS pension fund to provide for an income for the life of the member has now been removed. In addition, in order to be recognised as a QROPS by the HMRC, retirement benefits must not be payable before the age of 55.
In short, by removing the ‘70% rule’, QROPS members may now take up to 100% of their pension fund out of their QROPS at the age of 55, offering the possibility of complete pension freedom.
These changes are to be welcomed and are positive news for the QROPS industry. In addition to empowering retirees by giving them control over their own pension pot, it finally ends the uncertainty over the status of the previous Indian QROPS schemes.
QROPS schemes were always intended to mirror the UK system, and through these changes after April 2015 the UK has effectively ‘cleaned up’ the industry by removing from the official QROPS list schemes which were never true and legitimate QROPS in the first place, such as HDFC Life’s Immediate Annuity Plan.
No pension flexibility for Indian QROPS schemes
It should be noted that the flexible pension drawdown rules will not apply to India QROPS schemes. Whilst the new UK QROPS rules have set out the framework under which the flexibility rules apply, local legislation where the QROPS is domiciled must also already allow (or be amended) to allow flexible drawdown. Indian pension legislation requires members to purchase an annuity with their pension fund, and therefore members will not benefit from enhanced drawdown flexibility.
Therefore, if you transfer your UK pension into an Indian QROPS scheme, such as the Exide Life Golden Years Retirement Plan, you will not be able to access 100% of your pension pot at the age of 55.
In addition, the UK government has also restricted the flexible drawdown rules to schemes which are domiciled in the European Union (this provision was added in March 2015, via Statutory Instrument 2015/673).
The result of this restriction is that currently only Malta offers full pension flexibility for QROPS members – it is a full member of the European Union and it is not subject to the 70% rule.
Malta QROPS – the QROPS of choice for Indian residents
The result of the changes to the QROPS rules make Malta a very attractive option for residents of India who wish to transfer their UK pension into a more flexible and tax efficient QROPS scheme.
Only Malta QROPS schemes can offer Indian residents with the option to withdraw their entire pension at the age of 55. Malta offers political and economic stability as a full member of the European Union, in addition to a flexible investment environment.
We have covered the advantages and features of Malta QROPS schemes in a previous article.
For more information about transferring your UK pension into an overseas QROPS scheme, please contact us.