Pension funds can be passed down to family members free of UK Inheritance Tax (IHT) and scheme charges on death at any age.
If a member dies whilst being a member of a QROPS (and after being non- resident for 5 complete tax years) then no UK scheme charges are reportable to HMRC.
As from April 2015 the 55% tax charge on death has been removed from UK schemes on death prior to age 75 but there will still be a tax charge on death after age 75.
Income and withdrawals
Income payments can be paid gross or with a low rate of withholding tax from some QROPS.
Where a lower tax rate applies in the new country of residence or in the absence of a suitable double taxation agreement with that country, remaining in a UK pension fund may not be suitable.
Withdrawals from a QROPS may be taxed at a lower rate than from a UK pension. Withdrawals can be declared in a variety of ways, dependent upon the jurisdiction of the QROPS. For example, withdrawals declared as annuity payments may be taxed at lower rates than income withdrawals in many EU countries.
Income from a UK pension scheme normally has a 20% tax deducted at source even if a member is non resident. It may not always be possible to have income paid gross from a UK pension, and when it is possible it can be administratively onerous.
The lump sum and income distribution will depend on the relationship between local rules and HMRC QROPS rules. Where the QROPS is not regulated, or is not based in the EU (plus some exempt countries), 70% of the fund currently has to be designated to provide an income.
- There is no requirement to buy an annuity from a QROPS at any time.
- There are no income restrictions on protected rights funds in a QROPS.
- A QROPS can enable a client to diversify currency away from GBP.
- Multiple pensions can be consolidated into one QROPS.