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How you transfer a client into Qrops/Qnups

This article is part of
Guide to Qrops and Qnups

The HMRC’s Qrops guidance from April 2012 can be found online but should not constitute an adviser’s entire education on these schemes.

“To begin the process of transferring to Qrops, formal transfer applications will be required from the existing UK registered pension schemes,” Amin Malik, director of Delta Financial Management.

The transfer process includes providing the following to the existing UK registered pension scheme:

• completed transfer application forms and indemnity for the existing UK registered pension scheme;

• a list of the name and contact details of the Qrops;

• a lifetime allowance declaration; and

• a declaration confirming that the client understands the tax implication if the transfer was paid to an overseas pensions vehicle other than a Qrops.

Transferring out of a UK scheme into a Qrops will require the client’s funds to undergo a lifetime allowance test in case they are in excess of the LTA and would then be subject to a tax charge of 25 per cent paid by the UK registered pension scheme.

If you are sure the advice is right in the first place, adds Geraint Davies, managing director of Montfort International, transferring to a Qrops needs expert assessment.

He adds: “You don’t transfer to a Qnup – you bring new money in. You cannot take a UK registered pension scheme into a Qnup.”

Indeed the process of transferring from Qrops to Qnups is much simpler, advises Mr Malik. “However, this should only be considered after the relevant reporting requirements to HMRC have ended,” he cautions.

“Subsequent transfers to Qnups in such a situation do not require the funds to be tested against the LTA nor require a declaration for HMRC. In most cases, the existing Qrops providers would have separate Qnups for internal transfers.”

Mr Davies says if the transfer is your first one – call in an expert. “Strangely it’s the top advisors who are calling us in. This is worrying because what are the small advisory firms doing?”

“Evaluation has to be on a case-by-case basis – and with tax rules and pension rules for ever changing this is why guidance in this area has to be delivered by experts – we have seen far too many decisions based upon a person simply living ex-UK.”

Mr Malik agrees: “Comprehensive due diligence on the Qrops is not only necessary but essential.”

He suggests the first port of call is to refer to HMRC for the rules relating to transfers to Qrops so that advisers are familiar with HMRC requirements and also its list of recognised Qrops.