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There is often confusion regarding Qualifying Non UK Pension Schemes (QNUPS) and Qualifying Recognised Overseas Pension Schemes (QROPS). QNUPS and QROPS are similar schemes and are very closely related. It is important to understand the differences to avoid additional confusion in the already complicated process of pension planning.
While a QROPS can accept UK pension transfers, a QNUPS cannot. QNUPS is for clean capital such as income on which tax has already been paid. Various assets: mutual funds, shares and property (including residential property that generates an income) can all be moved into a QNUPS. QNUPS are most suitable for people under 60 years of age looking to save for retirement by making regular payments of surplus tax paid income.
QNUPS are extremely useful for people of UK domicile concerned with estate planning as no inheritance tax is due on the QNUPS assets when the holder dies.
QNUPS are available to both UK residents and expats permanently resident overseas. For those who are still a UK resident, a QNUPS should be used alongside a UK approved pension scheme for everything in excess of the permitted pension contributions of £50,000 per year.
Assets within a QNUPS scheme are excluded from inheritance tax. QNUPS have no contribution limit and can be available for savings for as long as you wish to continue investing. Pension schemes recognised as QNUPS have to meet strict UK revenue guidelines.
QROPS are in fact QNUPS but with different characteristics in both requirements and function. QROPS are intended for UK pension transfers. Typically anyone with a UK pension looking to retire or live outside the UK can transfer UK pension benefits into a QROPS and take advantage of tax benefits. It is worth noting that HMRC require detailed reports for QROPS transfers for 10 years from the date of the pension transfer, regardless of how long the member has been living outside of the UK. This is not the case with QNUPS.
QROPS allow for transfers from UK pension schemes. Such a transfer into a QNUPS would be seen as an unauthorised payment and therefore subject to taxation. QNUPS are more flexible regarding the asset classes that can be transferred into them including property and other tangible assets. QNUPS can accept transfers from international pensions and therefore also from QROPS.
Selecting the correct pension plan can be complicated and correctly navigating the best route through QNUPS and QROPS usually requires professional advice. It is vitally important to set up the correct solutions based upon your current and future location both in terms of residence and tax domicile.
Good advice from a professional financial adviser will ensure the best tax advantages and ongoing financial security for you and your family. Both QROPS and QNUPS offer excellent benefits and are a great opportunity for anyone holding a UK pension or concerned about estate planning and the effect of inheritance tax.
If you would like to examine whether QNUPS or QROPS are appropriate for your retirement needs, please contact our specialist pensions’ desk for an obligation free assessment of your individual situation. Our pensions team are highly experienced in handling UK pension transfers and will be able to offer good advice and professional assistance with setting up the most suitable solutions for your personal circumstances.