QROPS FREQUENTLY ASKED QUESTIONS
Listed below are answers to many of the frequently asked questions we receive about the transferring of pensions into a QROPS. The list of questions is reveiwed and updated on a regular basis.
For further information and answers to any other queries about the suitability of transferring a UK pensions scheme into a QROPS, please contact us directly at:
finance@arbutus-business.com
Q1 - Am I able to transfer protected rights funds into a QROPS?
A1 - YES - so long as the receiving QROPS is willing to accept it.
When the transfer takes place form CA 1881 needs to be completed to enable HRMC to keep track of where the protected rights are. In transferring protected rights it is necessary to state that you understand that all protection associated with UK pensions legislation is being given up.
Q2 - Can I transfer benefits that are in payment to a QROPS?
A2 - YES - so long as the receiving QROPS is willing to accept transfers of funds where the member is in receipt of unsecured or alternatively secured income.
If the member has not been a UK resident during the last five complete tax years the UK rules associated with these benefits do not apply. The UK provisions associated with these type of benefits apply until the five year rule has been satisfied.
Annuities in payment and pensions in payment from occupational final salary schemes may not be transferred.
Q3 - Can residents of the USA transfer a UK pension right into an IRA?
A3 - PROBABLY NOT - QROPS status has significance for UK tax purposes only.
UK scheme administrators and members should contact the relevant overseas authority for confirmation.
However, a possible solution is to transfer a UK fund to a non US based QROPS leaving the funds outside the USA.
Contact us for more information about the options available: finance@arbutus-business.com
Q4 - Can I purchase residential property with my QROPS fund?
A4 - YES - subject to conditions
If a member who has transferred a QROPS and has not been a UK resident during the last five complete tax years then the operation of the QROPS becomes subject to the legislation associated with the jurisdiction to which the fund has been transferred.
Some of these jurisdictions do permit investment into residential property although often only through indirect ownership via a corporate structure.
If the member fails to satisfy the five year rule then purchase of residential property within a QROPS would be subject to a tax charge typically seventy percent of the asset value.
Q5 - Are there any circumstances in which I should not transfer to a QROPS?
A5 - YES - although in most situations we have come across associated with non-UK residents the arguments are overwhelmingly in favour of transferring UK pension rights to a QROPS.
However, some of the older pension plans have benefits such as guaranteed annuity rates that were set when interest rates were much higher than today. In those circumstances it may be better to stay put, however it is important to seek appropriate advice.
Contact us for more information: finance@arbutus-business.com
Q6 - How long does the process take?
A6 - Allow a couple of months - occupational scheme transfers may take longer.
The process is initiated by asking you to complete a letter of authority. This enables the most upto date information about your scheme to be obtained including benefits and transfer value.
The correct discharge forms are also obtained should you decide to accept any recommendation to transfer to a QROPS.
Q7 - Which jurisdiction should I consider transferring to?
A7 - Countries in which QROPS options are based include Guernsey, New Zealand, Isle of Man and Hong Kong.
It is important to look for strong investor protection principles which are similar to those associated with the UK.
Additionally, it is important to look for jurisdictions where, after the QROPS member has been non resident for five complete tax years, there is a significant improvement in the investment and benefit options available. For example, where there is no requirement to buy an annuity at any time.
One of the most recent and innovative QROP Schemes was launched in October 2007 and is based in Guernsey. This is aimed at funds in excess of GBP 250,000.
A scaled down fund was approved and launched in November 2007 for funds with as little as GBP 50,000.
Q8 - Is an employment contract a requirement of a QROP?
A8 - This depends on the particular circumstances of the member.
However, all the referrals we have made to date have been into arrangements that are like personal pension arrangements in the UK with no form of employment contract required.
Contact us for more information: finance@arbutus-business.com
Q9 - The fund I wish to consider transferring into a QROP is of substantial value. Are there any tax considerations on transfer that I need to worry about?
A9 - Consider registering for "enhanced protection".
A transfer to a QROPS will be a Benefit Crystallisation Event and so will give rise to a tax charge if the amount transferred exceeds the individual's unused lifetime allowance. This allowance, to which everyone is entitled, is GBP 1.6 million in the 2007/08 tax year. Thus before any transfer to a QROPS is finalised it is essential to check whether there is any possibility of this allowance being exceeded.
If yes, then registration for an "enhanced protection" should be put in place before transferring to a QROPS. This is a straight forward process and removes any possibility of an attack on the transfer.
Q10 - Can I access the entirety of my fund as a lump sum following the transfer to a QROPS?
Q10 - This depends on the circumstances.
A QROPS member remains subject to UK pension rules unless or until you have been non UK resident for five complete tax years. After this period all of the UK restrictions fall away unless you once again become a UK resident.
Access to the fund is then dependent on whether the jurisdiction associated with the QROPS permits this.
There may be taxation consequences in respect of this course of action depending on your country of residence at the time. It is important to seek appropriate advice as each individual's circumstances may be different.
Contact us for more information: finance@arbutus-business.com
Q11 - What are the costs associated with the transfer of a QROPS?
A12 - This depends on individual circumstances, the nature of the benfits and the QROPS chosen.
The total costs levied by the receiving scheme and those associated with the advice given are liekly to be in the range of 2.5 percent and 5 percent of the total transfer value. In general terms, the larger the fund the lower the percentage costs.
There will be additional fund management and annual administration costs which are in general relateively modest.
Q12 - Can I transfer the assets held within my UK registered pension scheme into a QROPS without first liquidating them into cash?
A12 - This depends.
If the assets are held within an insurance company based scheme then the funds in which you are investing will be converted into cash, and the transfer to the QROPS will be in cash.
If your existing registered pension scheme is a SIPP or a SSAS then it may be possible to transfer the existing assets to the QROPS, if the receiving scheme administrators or trustees are willing to accept them.
Contact Information:
Robert Burns BA (Hons) FCCA
Managing Director
Arbutus Finance and Pensions
finance@arbutus-business.com
Tel: (From Spain) 902 88 90 20
Tel: (Outside Spain) +34 965 790 918
Tel: (UK) +44 1793 554 762
Arbutus Finance and Pensions - QROPS
|
