Transferring your pension overseas to reduce tax
UK residents are generally free to transfer their pension 'pot' to another pension provider. This can also include an overseas scheme providing the overseas pension scheme meets certain requirements. In particular it must be a Qualifying Recognised Overseas Pension Scheme (QROPS).
A QROPS is a pension scheme set up outside the UK which:
• is regulated as a pension scheme in the overseas country, and
• is taxed abroad There are lots of pension schemes that have got approval which include countries such as Switzerland, Liechtenstein, St Lucia, Singapore (now withdrawn), Gibraltar, Isle of Man as well as the more mainstream retirement destinations such as Spain, Australia, Canada and the USA. When you've transferred your pension to the overseas scheme you won't be subject to UK tax on the pension receipt if you live abroad permanently. There is though a 5 year non residence requirement that can apply UK rules until you have been abroad for 5 years. The beauty of the QROPS regime is that once you've exceeded the 5 year non residence requirement the pension scheme is then subject to the rules in the new country where the pension scheme is located. This means that as well as tax advantages there may be fewer restrictions on the type of investments or method of extracting your pension. Using a New Zealand QROPS for example it's possible for up to 40% of the fund value to be released as a lump sum without any New Zealand tax. You can then extract the remaining capital free of tax. Guernsey and Liechtenstein QROPS can also offer significant tax advantages. Using a QROPS could therefore allow you to access your pension free of UK and overseas tax.
• is taxed abroad There are lots of pension schemes that have got approval which include countries such as Switzerland, Liechtenstein, St Lucia, Singapore (now withdrawn), Gibraltar, Isle of Man as well as the more mainstream retirement destinations such as Spain, Australia, Canada and the USA. When you've transferred your pension to the overseas scheme you won't be subject to UK tax on the pension receipt if you live abroad permanently. There is though a 5 year non residence requirement that can apply UK rules until you have been abroad for 5 years. The beauty of the QROPS regime is that once you've exceeded the 5 year non residence requirement the pension scheme is then subject to the rules in the new country where the pension scheme is located. This means that as well as tax advantages there may be fewer restrictions on the type of investments or method of extracting your pension. Using a New Zealand QROPS for example it's possible for up to 40% of the fund value to be released as a lump sum without any New Zealand tax. You can then extract the remaining capital free of tax. Guernsey and Liechtenstein QROPS can also offer significant tax advantages. Using a QROPS could therefore allow you to access your pension free of UK and overseas tax.