A QROPS helps save tax is an often suggested reason
for transferring a pension outside of the UK. Is this true though?
In fact, whether a QROPS helps save tax or not will depend on the Double Tax Agreement between the residency of the investor and the jurisdiction of the Pension.
Before transferring a UK pension on the basis that a QROPS helps save tax, it is worth pointing out that the UK has over 130 double tax treaties. Having established whether your country of residence has a double tax treaty with the UK, you need to dig a little deeper to see where the income tax should be paid by reading the relevant section (better still, talk to a tax adviser locally).
After that, you also need to understand local rules on taxation of pension funds and income in the country of residency (hence why it is almost never worth transferring into a QROPS PURELY because a salesman says that a QROPS helps save tax in places such as South Africa and some southern Mediterranean countries. What taxes do QROPS save?).
UK Pension Income Paid Gross- negating the need for QROPS on the basis that a QROPS helps save tax
If the tax treaty allows, you can claim relief from UK taxation by completing a form from HMRC and getting your local tax office to sign it. This makes the sale, on the basis that a QROPS helps save tax, redundant as the sole reason for transfer.
(NB- there may be a number of other reasons where a transfer to a QROPS should be considered, but this blog is only focussing on the sale of a QROPS helps save tax).
How Does One Apply For Relief?
A number of countries have a specific form- that can be downloaded here–
There is a form online for countries not listed above
You will notice that there is also a section to claim back tax that has already been paid.
Don’t assume that a QROPS helps save tax without checking the double tax treaty first and understanding the treatment of pension income in the country where you plan to retire.
This blog is about Income Tax and there may be other tax considerations for those non-UK residents that are close to the Lifetime Allowance or those in their early 70s who are concerned about taxation on death – although the latter can possibly be avoided with good planning.
There will also be unique cases where a transfer to a QROPS helps save tax , thus making it the correct move, just make sure you know if this applies to you before you take the costly option of a QROPS because they are more expensive than UK pensions (usually by a long way).
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
This article was published on 4th September 2017
- Double Taxation Treaties as part of Expat Financial Advice
- QROPS in the UAE
- UK Pension Transfers In Germany
- USA Tax On QROPS | Pension Legislation
- 10 Reasons to use a QROPS – the facts and the myths – 45 % UK pension tax (2)
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