Here are some of the most frequently asked questions in relation to UK pension transfers and QROPS pensions. Just click on the question, and the answer will appear below.
- What are QROPS?
QROPS stands for Qualifying Recognised Overseas Pension scheme. Essentially it is a pension scheme which is authorised and regulated in the country in which it is situated, and has given an assurance to the HMRC that it will comply with all relevant UK laws governing overseas pension schemes. Once an overseas pension scheme has been authorised, a UK pension holder can transfer their pension to the QROPS, and avail themselves of the various benefits they may offer.
- How do I Know If a QROPS is suitable for me?
If you have permanently left the UK, have no intention of returning to live, and have acquired UK pension rights whilst working in the UK – then a QROPS may be a suitable solution for you. However, a QROPS pension is not a ‘one size fits all’ solution, and you need to get professional and independent QROPS advice in order to see if a QROPS is right for you.
- Am I obliged to invest in an annuity with a QROPS Pension?
There is no requirement to purchase an annuity with the proceeds of your QROPS pension. You have significantly more flexibility in relation to how invest your pension proceeds. This is why QROPS pension transfers are very popular with Indian residents, as Indian pension rules require pension holders to buy an annuity with their pension fund.
- What is the maximum lump sum payment I can take under the QROPS rules?
The maximum amount a plan member can take as a tax free lump sum (also known as the ‘Pension Commencement Lump Sum’) from the QROPS pension will depend on where the QROPS is based. In general, the amount varies between 25% and 30%, and this is also dependent on individual circumstances and the QROPS plan rules.
- Who can apply for a QROPS?
There are no restrictions as to who can apply for a QROPS. Basically, as long as you have permanently left the UK, you are free to transfer your UK pension into a QROPS. So the following groups of people can apply for a QROPS: UK citizens, Indian citizens, NRIs, dual nationals. In fact, you don’t even need to be a resident of India – so if you have worked in the UK, and plan to retire in another country, you can still benefit from a QROPS pension.
- Can I transfer my NHS pension into a QROPS?
Yes, you can transfer an NHS pension into a QROPS. In fact you can transfer any type of pension into a QROPS scheme. So whether you worked as a doctor or nurse in the NHS – or if you worked in the private sector, you can transfer you private pension into a QROPS. The only pension which cannot be transferred into a QROPS is the UK government state pension.
- I have started to draw down an income from my pension – can I still transfer to a QROPS?
If you have a defined contribution pension, and are in income draw down, then yes, you can still transfer your pension into a QROPS. However, if you have are already taking an income from your final salary pension, then it is too late to transfer your pension into a QROPS. Also, if you have already purchased an annuity, then you cannot transfer into a QROPS.
This is why it is crucial to speak with a specialist QROPS adviser before you take any action in relation to your UK pension, especially if it is a final salary pension, such as an NHS pension, to ensure that you are making the right decision for your retirement.
- How can I check that the QROPS pension scheme my adviser has chosen is properly authorized?
It is very easy to verify whether a QROPS scheme has been authorised by HMRC. The HMRC publishes a list of approved QROPS schemes on their website, and updates the list every two weeks. You can check whether your proposed scheme is on the list by clicking here.
- How is my QROPS Pension Income taxed in India?
As with all pension schemes, a QROPS pension will be subject to income tax in the jurisdiction in which it is established. However, subject to double taxation treaties in place between India and the QROPS jurisdiction, income may be able to be paid gross to avoid double taxation.
For Indian residents, there are several options as to where the most suitable QROPS jurisdiction may be, including Malta and Gibraltar. Our specialist QROPS advisers can advise you on the most suitable jurisdiction in your personal circumstances.
- Are there any minimum or maximum amounts an Indian resident can transfer into a QROPS?
There are no minimum or maximum amounts which can be transferred into a QROPS. Because of the level of work in setting up a QROPS, cost may be a factor for small transfer values.
However, QROPS Adviser has built up a network of all of the leading QROPS providers and administrators, and can access schemes which have a minimum transfer value of as little as £25,000.
Similarly, there is no maximum transfer value, although you should be aware that if your transfer value is more than £1.5 million (for the 2013/14 tax year), then there will be a crystallisation event, which may incur a tax charge. Your QROPS adviser can advise you further in this respect.
- Am I allowed to take out 100% of my money out of a QROPS?
No, it is not possible to withdraw your entire pension as a lump sum. And nor should you either want to, or be advised to, as a pension is designed to provide you with an income for life. Whilst there were previously one or two schemes which allowed this, these have now been closed down by the HMRC.
- What is the Process to transfer my QROPS to India?
The first step in the transfer process of a QROPS to India is to obtain up to date transfer values of your UK pensions (QROPS Adviser will liaise with the pension administrators on your behalf to obtain these).
Once these have been obtained, QROPS Adviser will carry out a very thorough analysis on your personal financial circumstances, including your financial needs, goals and objectives, in to determine whether a QROPS transfer to India is suitable in your circumstances.
If a QROPS is suitable, then a discharge form is sent to the existing pension provider, and documentation completed to enrol you as a member of the QROPS scheme. The pension funds are then transferred and invested in accordance with our advice and recommendations.
From start to finish, the whole process takes between 2 and 3 months, although much will depend on the pension administrator of your existing pension scheme.
Have you returned to India and still have your NHS Pension? From 2015 you will no longer be able to transfer your NHS pension to a QROPS plan as a result of a UK government ban on NHS pension transfers – meaning you will have to wait until you are at least 60 before you can draw an income or take a tax free lump sum – as opposed to 50 under a QROPS pension.
For a free consultation on how you can still transfer your NHS pension into a QROPS pension plan before the deadline expires, please contact us immediately.