With a growing demographic shift towards emigration, Andrew Tully, financial planning manager at Sta...
With a growing demographic shift towards emigration, Andrew Tully, financial planning manager at Standard Life, believes that QROPS represent an excellent opportunity to maximise pension contributions and benefits.
Speaking at the International Investment London Forum in May, Tully said there were around one million emigrants between 2004 and 2006, and Qualifying Recognised Overseas Pension Schemes (QROPS) can deliver 'significant benefits' to this group.
QROPS were introduced in 2006 as part of pensions simplification, and all death benefits became IHT-free from the 2008/09 tax year. The pension does not have to be based in the country of future residence, so investors can choose the most flexible benefits regime according to their needs.
Tully added: "For a client retiring overseas, there may be no need to buy an annuity. This is a big issue for high net worth investors.
"These funds can also be much more flexible in how the income is taken and passed on to the rest of the family."
UK pension investors may have to cease contributions to ensure that the overall pension pot does not go above the lifetime limit, which is currently set at £1.65m.
The transfer into a QROPS is tested against the lifetime limit when the pension fund is moved overseas.
Tully said suitable clients will ideally have a pension pot of £250,000 or more. They will either be UK residents intending to emigrate, UK nationals retiring abroad, international professionals or foreign nationals temporarily residing in the UK.
Usually, clients will be intending to spend at least five years abroad.
To qualify as a QROPS, schemes need to be recognised as a pension scheme in one of the qualifying countries (all EU countries are included).
A total of 70% of the fund needs to be used to provide an income for life, and the fund needs to provide the Revenue with certain information.
After five years of non-residency, the money can be switched to a local non-QROPS scheme. (For more on QROPS, see pages 15 and 18.)
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