Brexit & UK Pensions
Have you worked in the UK pre Brexit?
If the answer is yes, Brexit may affect you more than you might think. You may not heard of QROPS? The UK 2017 Spring budget introduced an upfront, 25% tax on the value of the fund, on certain pension transfers. The UK government have introduced this measure to prevent transfers to exotic destinations, eg Hong Kong, that might facilitate access to the full fund while paying little or no tax.
Brexit and your pension
Currently, if you have pension funds left in the UK, you can still transfer from the UK pension scheme to a Qualified Recognised Overseas Pension Scheme (QROPS) and avoid any tax liabilities to HMRC (Her Majesty Revenue and Customs) on transfer, where:
- Both the individual and the pension scheme are in countries within the European Economic Area (EEA) or
- If outside the EEA, both the individual and the pension scheme are in the same country, or
- The QROPS is an occupational pension scheme provided by the individual’s employer.
If your circumstances change within 5 tax years of the transfer, HMRC will reconsider the the tax treatment of the transfer. The changes will take effect for transfers requested on or after 9 March 2017. The UK government will also legislate in Finance Bill 2017 to apply UK tax rules to payments from funds that have had UK tax relief and have been transferred, on or after 6 April 2017, to a QROPS. Furthermore, UK tax rules will apply to any payments made in the first 5 full tax years following the transfer. This is regardless of whether the individual is or has been UK resident in that period.
Brexit The Implications
The implications of Brexit negotiations could have potential ramifications for further restrictions and conditions to claiming or maturing your pension pot in the UK. For this reason, we would be inclined to agree with our many clients who are non-UK resident holders of UK pension funds that is time to remove as much ownership, accountability and responsibility from HMRC as possible.
What to realise
It may be beneficial to transfer your UK pension, to a non-UK jurisdiction, for tax efficiency and perhaps currency considerations. Historically, the QROPS has been a ‘single premium’ structure which means overseas business is kept administratively separate from, say your local Irish pension provision. Have you ever worked in the UK? Do you have dormant pension funds in the UK?
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