UK Pension Changes.
The UK Finance Bill 2017 brings major changes to the QROPS rules.
Under the UK Finance Bill 2017 legislation, transfers to QROPS requested on or after 9 March 2017 will be taxable unless, from the point of transfer, both the individual and the pension savings are in the same country, both are within the European Economic Area (EEA) or the QROPS is provided by the individual’s employer.
If this is not the case, there will be a 25% tax charge on the transfer and the tax charge will be deducted before the transfer by the scheme administrator or scheme manager of the pension scheme making the transfer.
It also widens the scope of UK taxing provisions so that, following a transfer to a QROPS on or after 6 April 2017, they apply to payments out of those transferred funds in the five tax years following the transfer.
No UK tax charges apply if you are resident in New Zealand, and you do not make any withdrawals from your NZ QROPS scheme until at least 5 clear tax years after leaving the UK.
It is important that you consider your pension options carefully and take appropriate professional tax advice. Contact us at no obligation to discuss your UK Pension transfer options.
‘Pension Freedom’ – The Pensions Schemes Act 2015 and changes to UK Pensions.
What are some of the changes under ‘Pension Freedoms’? For most Defined Contribution Schemes most changes are seen as beneficial:
- Greater flexibility around how individuals can access funds from a Defined Contribution Pension scheme in the UK, from the age of 55.
- Defined Contribution Pension Scheme individuals will no longer have to worry about pension savings being taxed at 55% on death.
- There is no compulsion to purchase an annuity.
For Defined Benefit and Final Salary Schemes the changes may be detrimental:
- Members of Defined Benefit Schemes do not have the same pension flexibility as Defined Contribution Schemes.
- Individuals with unfunded public sector schemes such as NHS or Teachers Pension are now unable to transfer out to Recognised Overseas Pension Schemes, or Defined Contribution Schemes.
- This is likely to financially disadvantage unfunded public scheme individuals, particularly non-UK residents living in jurisdictions with different taxation and estate planning rules.
- Defined Benefit and Final Salary Schemes schemes who do allow transfers out now require individuals to take advice from an adviser authorised by the UK Financial Condict Authority (FCA) before allowing a transfer.
- For overseas transfers, a non-UK resident will therefore need advice from the local (overseas) adviser and an FCA-authorised Adviser, imposing extra difficulties and costs on the transfer process.
There are likely to be further changes over the coming months as the new pension rules bed in.
Information on pension options in the UK under ‘Freedom and Choices in Pensions’ from April 2015 is available from the Pensions Advisory Service.
Information on Defined Benefit (DB) to Defined Contribution (DC) transfers can be found here.
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