Greater flexibility for pensions
From 6 April 2015, the new ‘pensions flexibility’ rules removed restrictions on access to UK personal pensions for those aged 55 and above. There is no longer an obligation to buy an annuity or put your money into drawdown. It is now possible to take a tax-free lump sum in the UK of up to 25% of your pension pot; however, you should note that all payments received over this amount are taxable as income.
Developments in QROPS legislation
Qualifying Recognised Overseas Pension Scheme (QROPS) were introduced in 2006 as part of a major overhaul of Britain’s pension framework to simplify UK pension transfers to another country. Individuals who have been members of a UK registered pension fund and are currently living outside of the UK can consider transferring their retirement fund into a more appropriate retirement vehicle such as an overseas pension scheme.
Types of pension that can be transferred to a QROPS
QROPS receive pension transfers from the following UK registered schemes:
- Occupational schemes (company pensions)
- Additional Voluntary Contributions (AVC)
- Small Self-administered Pension Schemes (SSAS)
- Self-invested Personal Pension Scheme (SIPP)
- Personal Pensions
- Unsecured Pensions (income drawdown)
QROPS Rules
When transferring your UK pension to a scheme overseas, it is important to check that it meets the necessary conditions required to be accepted as a QROPS. An approved ROPS list compiled by HM Revenue & Customs (HMRC) allow pension transfers to be made to a country outside of the UK as long as the receiving scheme fulfils its qualifying criteria.
The existing QROPS rules stipulate that overseas schemes should mirror those in the UK in that at least 70% of tax-relieved funds must be used to provide the individual with an income for life.
QROPS benefits for returning French expatriates
UK pension transfers for French expatriates to a QROPS offer flexibility regarding how and when benefits can be taken. Benefits include:
- You can take up to 30% of your pension fund tax-free on retirement. This is higher than the current UK limit of 25%.
- A lifetime income can be taken in France by way of income drawdown.
- An overseas pension transfer helps solve currency risk by allowing you to invest your pension and take income and benefits in a currency of your choice rather than be limited to Pound Sterling.
- QROPS offer a greater choice of investment options, allowing you to access funds managed by any of the world’s leading investment groups.
- Assets held in a QROPS are not subject to ‘UK Inheritance Tax’ if you die in France or elsewhere outside of the United Kingdom. This means your wealth is protected for future generations, which is in stark contrast to the potential 55% tax charge on death, were you to leave your pensions in the UK.
- There are now low-cost pension transfer options available.
UK pension transfers for French expatriates – QROPS jurisdictions
Regulations vary according to the jurisdiction of the QROPS. However, holders of schemes in EU-based jurisdictions such as Malta can now benefit from full flexibility in access to their pension pot. Malta’s recent change of legislation will allow schemes to pay benefits in a similar way to that of the UK. This puts Malta in a commanding position as the jurisdiction of choice for QROPS.