The recent Budget proposed by George Osborne has made a point of focusing on high net worth individuals and in particular UK expatriates who are looking to protect their hard earned income. HMRC feels that the majority of QROPS schemes adhere to the rules of the regulations but do not fit in with the spirit of the schemes.
As a consequence the Tory Chancellor, George Osborne, this week has proposed a series of measures which will seek to pressure individuals to make sure that they don’t abuse the system that has been introduced.
There are a number of key amendments to QROPS that have been introduced. Firstly, historically an individual transferring their pension overseas into a QROPS was able to take up to 100% of the fund as a tax free, cash lump sum. Now however individuals will only be legally allowed to take up to 30% as a tax free, cash lump sum, even though this is better than the 25% that is allowed on UK pensions, 70% will still be required to be used to provide an “income for life”.
A second critical amendment to the QROPS regulations that will take effect from April 6 2012 is that members of a scheme will have to now report on all benefits paid for 10 years against the existing 5 years. After the end of the 10 years the QROPS scheme will not have to inform HMRC of the benefits paid to the schemes member. This makes it very important for an individual to join a credible scheme which is well run as the consequences for not reporting sufficiently could have serious financial consequences.
For example if you pay your pension into a non-qualified scheme you will incur a tax charge of 40% of the total amount of the pension and in some conditions you may be charged an additional 15%. Not something a soon to retire expatriate would want to face.
For more information on the effect of the Budget on QROPS and other related issues. Contact us here.