1. QROPS for a USA resident.
Since April 2006 it has been possible for non-UK residents, or those considering leaving the UK, to
transfer pension benefits accrued in the UK to a QROPS. This allows you to transfer your UK pensions to
a jurisdiction that allows for benefits you could only dream of in the UK. This legislation was forcred on
the UK government by an EU directive.
However a QROPS transfer for a USA resident was until 2010 impossible to undertake. Although many
401K arrangements had been granted QROPS status by HMRC the IRS have deemed UK pension
transfers to a 401K incompatible given the different structure of tax and benefits. There is little chance
that this will change. Outside the US no QROPS trust was in a position to meet the strict IRS tax
reporting requirements. Furthermore any transfer undertaken by a US resident would lead to a tax
charge on the whole amount of the transfer. These QROPS trust will never be acceptable to the IRS, as
they are unable to meet the reporting requirements, given the way they are structured.
Understanding the problems involved a QROPS solution specifically for US residents was constructed.
We understand that a UK pension scheme transfer for a USA resident has to meet IRS tax reporting and
be acceptable as a foreign trust. The solutions we offer are fully recognised by the IRS under DTA
(Double Taxation Agreement) and as such meet all IRS reporting requirements, as included in FATCA
amendment IRB 2010-60.
A QROPS transfer can provide the following benefits for a USA resident:
No UK income Tax liability on income. UK pensions are taxed at source, QROPS is not subject to UK Tax.
2. QROPS allows your assets to be structured in USD, with income paid in USD, eliminating currency
exchange risks. This can be paid to a USA bank account in USD.
When in the USA, take income in Dollars, when in Europe take income in Euro, and if in the UK take
income in GBP. This leaves you open to currency exchange fluctuations outside of you control. QROPS
allow you to take control back.
No need to buy an annuity or ASP (Alternatively Secured Pension) at age 75. This affords you greater
control. Your existing UK provision may lead you to take a low rate of return. For example, once a fixed
annuity of 3.5% p.a.is purchased by your UK scheme that would then be your return for life. Your
transferred pension could pay you an income of 10% p.a. It also allows your fund to continue growing
whilst you take an income. Which can then provide a higher pension income in later years.
No Tax liability on your pension fund assets as they continue to grow. Assets in your UK pension fund are
subject to tax. Once transferred your fund is not subject to tax, and continues to grow Tax free.
A far wider range of investments, ranging from cash, unit trusts, shares commodities, gold, ETF´s,
property (including overseas property) and much more.
Fully portable from country to country.
You are able to leave the remainder of your pension fund to your heirs on your death. As most people
will choose a single Annuity, once in receipt, your UK pension has no value to your partner or children.
Whereas your transferred pension can be left to whoever you wish.
Pension rights transferred into a HMRC approved QROPS are protected from UK Inheritance Tax.
By moving UK pension benefits to a HMRC approved QROPS, assets are effectively removed from the UK
tax net. For many expatriates the avoidance of UK taxes on pension income and the dangers of
additional pension tax levies are an important planning consideration.
Moving your UK pension arrangements to a QROPS if suitable given your own particular circumstances,
can only improve your position.
Most importantly, once moved to a QROPS you have control over your money. If left in your UK pension
arrangements it is highly likely that additional restrictions will be put in place which will adversely affect
you.
www.the-qrops-specialist.com