There are a number of QROPS penalties which can be incurred if the pension transfer process goes against QROPS legislation.
The QROPS is managed by a trustee or administrator and they must ensure that all payments, within the first 5 years are within UK limits and HMRC are informed.
QROPS Penalties will be incurred if:
- A UK pension holder incurs a 55% tax penalty, on the excess of any UK pension funds transferred overseas, above the UK Lifetime Allowance
- If a pension holder accesses their pension before 55 an unauthorized payments tax penalty will be incurred
- If the UK pension holder receives greater than 30% of the transfer fund in the form of a lump sum, from the QROPS, within 10 years of transferring the pension a penalty will be incurred
The QROPS administrator has to report on any transfer made to another scheme within the reporting period. In this event, the receiving scheme has to be another QROPS.
If a offshore pension scheme regularly fails to follow HMRC legislation it may be removed from the HMRC authorised list.
For more information on these QROPS penalties and on setting up a QROPS scheme which will mitigate these risks please contact us here.