QROPS, QNUPS - Qwhat?

Since A-Day supposedly brought in pension simplification on 6 April 2006 the SIPP (self-invested personal pension) has been developed in the UK to give some degree of flexibility to individuals wanting to have control over the investment of their personal pension funds.

However, with the ever increasing internationalisation of the global economy, many people find themselves working in several different countries and perhaps retiring in yet another. That gives rise to ever-increasing complexity in trying to save for retirement with tax relief on contributions, under very different pension and tax regimes, and to draw funds tax efficiently in retirement. The QROPS and QNUPS concepts have been introduced in the UK to help this market. Their attraction is to the genuine international expatriate.

A QROPS is designed to enable non-UK resident individuals who have accrued pension benefits in the UK to transfer them outside the UK.

The receiving scheme needs to registered with HMRC and to meet investment and other criteria such as not permitting withdrawal of funds before 55, which are broadly similar to the UK SIPP rules. A slight advantage is being able to pay up to 30% as a tax free lump sum (25% in the UK). 70% needs to be applied in paying a pension but any surplus on death should be payable to your selected beneficiaries. However, 5 years need to elapse after the individual has ceased to be UK resident before benefits can be paid tax free. This is rather like the 5 year rule for escaping UK capital gains tax after emigration.

A QNUPS is similar to a QROPS but not “approved” by HMRC and the Administrators undertake no reporting obligations to the UK. They merely have to comply with local regulation.

There are many more detailed regulations to be considered and expert advice is needed. However, some of the complexity stems from the choice of location for the administration of a scheme  which has suitable tax treaties with the country in which the pension plan holder is (a) living and working, and (b) planning to retire.

If you have been working and accruing pension benefits in the UK but are now moving to live and work in (say) Italy or the USA, you may find that a transfer to an Italian or US based pension scheme is disadvantageous for local pension contribution reasons, or perhaps restrictions on permitted investments in the scheme while you continue to accrue benefits. There may also be tax problems locally on drawing benefits on retirement, or on premature death.

Locations emerging to service the QROPS /QNUPS market are Malta, the Channel Islands, Singapore and others around the globe. However, which will suit you may depend on the tax treaties between these locations and the countries where you live or work. There is no simple “one size fits all” solution.

Stone King cannot advise on QROPS or QNUPS transfers but we do know specialist firms who do.