On Monday 29th September 2014, the Chancellor of the Exchequer, George Osborne, announced that from 6thApril 2015 UK pension members will have the freedom to pass on their remaining defined contribution pension fund to any nominated beneficiary, without any tax charge, should they die before age 75. Currently there is a 55% tax charge which currently applies to all “crystallised” defined contribution pensions (such as personal pensions, group personal pensions and SIPPs) when a lump sum is passed on to a beneficiary upon the member’s death.
After the pension member attains age 75, the benefits can be received by the beneficiaries at their marginal rate of tax if they take a partial withdrawal or income. If they take the whole lump sum then they will be taxed at 45%.
Impact on QROPS
One of the main advantages of QROPS was that after 5 complete UK tax years of a members’ non-UK tax residency, the 55% tax on crystallised funds, upon the member’s death, no longer applied. A UK pension, from 6th April 2015, will now be able to offer this (regardless of a pension member’s residency status).
Of course death benefits would not be the sole reason to use a QROPS (income flexibility and tax efficiency would also be considerations) and certainly, post age 75, a QROPS could potentially still hold the advantage over a UK pension when considering death benefits.
A UK Pension Transfer to Australia
For Global QROPS clients looking at a pension transfer to Australia, the announcement regarding UK pension death benefits, would not be a reason to change any decision, to transfer, in isolation. The death benefits from an Australian QROPS are still favourable and the tax efficient retirement benefits, in Australia dollars, available from an Australian QROPS, still makes a pension transfer to Australia a compelling proposition.
Please feel free to speak to a Global QROPS adviser for more information.
