Transfers To QROPS And The Pension Special Allowance Rules
Posted by Paul Davies on 19/12/09 14:01
Many of Global QROPS Ltd’s clients, that fall into the high earner category, look to maximize the funding in the their UK pension before they migrate and potentially transfer those funds to a QROPS (Qualifying Recognized Overseas Pension Scheme).
Before a change in the rules, introduced in the Finance Act 2009, a high earner could contribute up to their earnings into a UK pension scheme, subject to the annual allowance (£245,000 in tax year 2009/10), and receive full tax relief on the contributions. However, a temporary measure introduced by the Finance Act 2009 placed a restriction on the amount that could be contributed.
What changes do Global QROPS Ltd’s clients, that are high earners, need to be aware of?
The temporary measure (mentioned above) is the ‘pension special annual allowance’ and is a tax allowance that restricts the tax breaks on UK pension contributions for high income individuals with relevant income of £150,000 a year and over. This temporary measure commenced on 22nd April 20009 and is expected to be in place until 5th April 2011 – at which point the Government intends to finalize the rules.
The basic allowance is set at £20,000 (although an individual may qualify for an enhanced allowance of up to £30,000). Should a high income individual contribute in excess of the pension special allowance, then a tax charge on the individual would be generated.
High earning individuals, looking to top-up their UK pensions before transferring to a QROPS, should be aware of the potential restrictions.