SIPPS and QROPS checklist- Engaging with qualified pension adviser about getting the right facts about QROPS and SIPPs is essential for a satisfying outcome, and so we have created a SIPP and QROPS checklist – Get the Right Facts
The idea here is not to bore you with technical detail, but to just focus on issues upon which you should both be aware and sometimes avoid. You are welcome to ask us for more information.
SIPP and QROPS checklist – Get the Right Facts
We have provided 10 reasons to use a QROPS – Facts and Myths which can select here but the two reasons listed below in our SIPP and QROPS checklist have been seen in recent reports for justification incorrectly to clients.
Avoid 45% Tax on UK Pensions
We have covered this issue in detail here.
To remind people that are given this as a reason to transfer, I would like to go back to these points-
- Most expat destinations have a Double Tax Treaty with the UK that would allow HMRC to pay any pension income gross – without tax deduction. For clarity, that means that if you pay 10% tax where you live, then that is what you would pay on your income from your UK pension!
- We are a UK based adviser, and in all the years of our providing pensions’ advice we have yet to come across anyone having to pay 45% tax on their pensions. However, even if you doubt this, then just be aware people in the UK taking pension income in real terms pay on average around 13.5% of tax on their income (due to the income bands) and if they die before 75 there is usually no tax.
- If no Double Tax Treaty exists, then the expat would have to have a UK taxable income of over £150,000 pa and only the portion over £150,000 pa is taxed at 45%. Again, I refer to the average of 13.5% of tax on this income.
- On death, after 75, careful planning should ensure that beneficiaries pay little to no tax if the pension fund is still in the UK.
- QROPS income is taxable, and some countries apply additional taxes upon transfer after death to beneficiaries based on where the beneficiary lives, not where the original pension holder lived.
The Lifetime Allowance
The current Lifetime Allowance is £1 million pounds. Some may have protection of greater than this, if applied for. Those that have not can still apply for protection of £1.25 million.
In recommendation reports we have seen expats are being told to transfer to a QROPS as the LTA is to be reduced dramatically below £1 million, and they do not explain that it is possible to apply for protection of £1.25 million. Indeed, one report we have seen states that the current level of the LTA is to be reduced to £750,000; this is just simply made up and there is no evidence of this. In fact, from 2018 the LTA will be indexed and will increase. In the past, the LTA has been both increased and reduced and many experts believe it will be increased again. If we refer to the 2015 UK Budget.
George Osborne said: “I want to ensure those still building up their pension pots are protected from inflation, so from 2018 we will index the lifetime allowance.”
So, do not move your pension to a QROPS based on made up scare stories or a false supposition! Every time the limit has been reduced there has been a period (often years) where it has been possible to apply for protection from tax on pension values far in excess of the current Lifetime Allowance, and this is true right now.
SIPP and QROPS checklist summary
Getting the right facts about QROPS and SIPPS is essential. A decision based on the facts is a far safer way of managing ones retirement and also for planning on what your beneficiaries will pay.
These two are just a couple of misconceptions we have come across, as a result of reading pensions’ advice given out to expats. So what should expats do?
How can expats get the right facts about QROPS and SIPPs?
Read our website with our SIPP and QROPS checklist information and come and talk to us.
SIPP and QROPS checklist – Get the Right Facts
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 2nd February 2017
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- International SIPP versus SIPP review
- 10 Reasons to use a QROPS. Facts and Myths, QROPS Increased Flexibility (7)
- SIPP Planner of the Year
- QROPS in Spain | QROPS Advice
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