Global QROPS Ltd Quoted in Money Marketing Regarding Asp and QROPS
Posted by Simon Harvey on 27/01/10 12:42
Qualifying Recognised Overseas Pensions Scheme (QROPS) specialists, Global QROPS Ltd, have been quoted in the UK financial publication, Money Marketing, regarding the use of QROPS for UK expat pension members.
A study by a leading UK Self Invested Personal Pension (SIPP) provider suggests that there is an increase in overseas pension transfers over UK pension transfers to a SIPP (for example) because of the steep UK tax charges on death whilst in Alternatively Secured Pension (ASP).
Once a UK pension member reaches the age of 75, they will be required to take pension benefits (if they haven’t already). Since 6th April 2006 (A-day), as an alternative to purchasing an annuity with accrued pension funds, a UK pension member can go into ASP – which is a form of pension income drawdown, paid from the fund. ASP was introduced as an ‘alternative’, to buying an annuity as certain religious groups objected, on moral grounds, to the concept of annuities.
One of the main problems with ASP is, once it has commenced for a member, the death benefits are severely restrictive for beneficiaries. In short, if a beneficiary was to receive death benefits as a lump sum from a deceased member of a UK pension, who was receiving benefits in the form of ASP, a tax charge as high as 82% could apply to the fund.
UK expat pension members, in retirement, have the option to transfer to a QROPS. The study suggests that many consider this as, once the 5 year reporting period falls away, the local rules of the QROPS scheme, for tax on death benefits, apply and not the UK’s rules. This could lead to the removal of the ‘82%’ tax charge on death, for beneficiaries.
Whether this is the main reason for a UK pension transfer to QROPS is by no means certain, however, it is definitely a consideration.
Please see link to the article: http://www.moneymarketing.co.uk/£500m-transferred-to-qrops/1005325.article