Transferring UK Pensions To Isle Of Man QROPS
Posted by Simon Harvey on 18/10/09 14:12
When migrating overseas many UK pension members investigate the possibility of transferring their UK schemes to overseas pensions. Since 6th April 2006 the overseas scheme would have to register and be approved by the UK’s Her Majesty’s Revenue and Customs (HMRC) as a QROPS (Qualifying Recognized Overseas Pension Scheme) in order to be able to accept UK pension transfer money.
Many jurisdictions, throughout the world, have QROPS. One such jurisdiction, that is close to home, is the Isle of Man. What are some if the considerations that someone would need to take into account with Isle of Man QROPS?
Amongst the main points to consider will always be how pension funds, transferred to a QROPS (anywhere in the world) would be treated for tax and what level of retirement benefits can they provide?
An Isle of Man QROPS will pay to it’s members income at UK Government Actuary Department (GAD) rates within the QROPS ‘reporting period’ – which is 5 complete tax years of the member’s overseas residency. This income will be taxed at source at a rate of 18% – although there is an allowance for the first £2,120 per annum (for tax year 2009/10) on this income for Isle of Man non-residents. (Although a non-resident may have to pay further income tax on receipt of QROPS income in their country of residence).
As far as the payment of tax free cash is concerned, a member can receive 25% of the fund as a tax free lump sum if this is paid out within the (QROPS) reporting period. If the member waits until after the 5 year reporting period – and they haven’t drawn any tax free cash previously – 30% of the fund is available as a lump sum.