Your Industry 

When and why you might transfer clients into Qrops/Qnups

This article is part of
Guide to Qrops and Qnups

“Transferring UK registered pension schemes to overseas pension schemes that are not Qrops will give rise to unauthorised payment charges of up to 55 per cent and thus should be avoided,” Amin Malik, director of Delta Financial Management.

“This makes Qrops transfers a must for overseas pension transfers. To ensure individuals appreciate the transfer conditions, they are now required to formally declare prior to the transfer that they are aware of such conditions and the tax implications if the rules are breached.”

Geraint Davies, managing director of Montfort International, says unauthorised payment charges should not occur as UK registered pension schemes should have a specific transfer process that prevents this from happening.

He warns that due to the lack of knowledge and regulation around these transfers outside the UK, “more and more overseas advisers are making the decision that... if you live outside the UK, the advice is to transfer. This is appalling as the complexity demands significant analysis.”

“Advice to transfer requires knowledge not only of the financial planning issues, but tax consequences of the UK and the country of residence as well as visa implications, social security issues and it takes a very astute advisor with bags of experience.”

Mr Davies thus recommends: “If an adviser doesn’t understand international tax potential consequences and or the way to guide a client to the door to advice, then walk away. Get an expert in [as] you are on dangerous ground.

But if you are confident of the complexities or are consulting a third-party expert, then transferring to Qrops would give individuals greater control and flexibility, explains Mr Malik.

“Once the funds are invested in Qrops, the eventual retirement benefits would not be tested against the lifetime allowance (LTA) unlike those of UK registered pension schemes.”

A person who has a UK registered pension valued more than the LTA limit when assessed would incur the LTA charges for the excess upon transfer.

“Notwithstanding this an individual may have a higher specific LTA than £1.5m if he or she has applied and retained £1.8m fixed protection or previous primary or enhanced protection,” Mr Malik says. “Similarly, Qnups are not subject to the LTA limits.”

He states that during the reporting period, Qrops members should retain their pension funds within the Qrops. However, once the reporting requirements cease to apply, funds that were initially transferred to Qrops can then be considered for a transfer to a Qnups.

“One of the main benefits of doing so is that unlike Qrops, such Qnups are generally not subject to unauthorised payment charges.

“For example, individuals that have commenced withdrawing retirement benefits from Qrops would be subject to unauthorised payment charges if the remaining funds in the Qrops are paid to nominated beneficiaries as a lump sum in the event of the members’ death during the reporting period.

“This would not be the case if the Qrops were transferred to Qnups.”