QROPS helps expats limit punitive 55% tax

Pedro Gonçalves
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QROPS helps expats limit punitive 55% tax

Most wealthy Britons risk 55% tax charge if their pension funds breach the lifetime allowance but expats can limit the punitive tax by moving to a QROPS, according to wealth advisory firm Blevins Franks.

Britons living abroad that go over the current £1.055m lifetime allowance can limit the hefty HMRC charge by transferring their UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS), Jason Porter, director of Blevins Franks told the FTAdviser

However, even as a QROPS can help reduce the exposure to tax penalties, there are drawbacks.

If you transfer one or more UK pensions into a QROPS and your total benefits are under £1.055m, you will not face lifetime allowance taxes on the transfer"

"If you transfer one or more UK pensions into a QROPS and your total benefits are under £1.055m, you will not face lifetime allowance taxes on the transfer" Porter said.

"However, make sure the QROPS  is within the European Economic Area (EEA), such as Malta, otherwise you would still lose 25% through the overseas transfer charge," he added.

The overseas transfer charge - a 25% tax on the value of a QROPS pension transfer -  comes due when a retirement saver switches a UK or existing QROPS to a QROPS that is not based in the country where they live.

 "Regardless of whether the lifetime allowance will affect you, with Brexit around the corner, now is a good time to review your pension options.

"If you are living in Spain, France, Portugal, Cyprus, Malta or anywhere else, you should regularly check your financial planning to make sure you take advantage of available opportunities and protect your wealth in the most suitable way for your particular circumstances."

Andrew Tully, technical director at Canada Life, told the publication that QROPS can be confusing so getting professional advice is key.

"Overseas pension transfers are a complex area, and a key target for pension scams. These transfers are not likely to be the most suitable option for most people so great care is required, and taking expert regulated advice is essential," he said.

 

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