PensionsNov 2 2011

Q: How do Qrops/Qnups differ from UK pensions?

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The reporting requirement then ceases.

The obligation remains, however, for scheme funds to be used in a manner consistent with what HMRC considers appropriate for a pension – i.e. to provide for income in retirement.

The rules of a Qrops may vary significantly from those of UK pensions and allow certain benefits not available in a UK pension.

Keith Boniface, marketing director of Brooklands Pensions, said these differences might include:

1) the level of tax-free lump sum available at retirement

2) the age at which benefits can be taken

3) tax charges on payments after retirement.

The tax rules of the Qrops jurisdiction may mean the pension is paid gross and dependent on the client’s residency it may also be the case that pension income is received virtually tax-free, unlike if the scheme or client is resident in the UK.

Unlike a UK pension, contributions to Qnups do not receive tax-relief.

There are also no limits on the levels of contribution to a Qnups.

One of the key distinctions of Qnups is that assets within it are not subject to UK inheritance tax and, while Qrops are only designed for people leaving the UK, Qnups may be used by UK tax residents.

According to Keith Boniface, marketing director of Brooklands Pensions, this is only advisable if a UK resident has used their UK tax-relieved pension allowance, or is high net worth or a very high earner, and contributions can be demonstrated as being reasonable in the context of retirement provision.

Any assets remaining in a Qnups on the death of the scheme member will generally pass to beneficiaries free of UK inheritance tax.