Recent changes announced in the UK 2008 Finance Act has given non UK tax residents the incentive to transfer any UK pension fund offshore. UK pension plan members living overseas can transfer their UK pension funds and benefits to a Qualifying Recognised Overseas Pension Scheme (QROPS).

The UK HRMC will only allow transfers to legitimate approved schemes most of which are listed on the HRMC web site;
http://www.hrmc.gov.uk/PENSIONSCHEMES/qrops-list.htm.

Requirements
For a scheme to be considered as a QROPS it must meet the conditions of being an overseas pension scheme under section 150(7), 150(8) and 169 of the Finance Act 2004. In addition it must meet specific regulatory requirements and tax recognition conditions as set out in the Pension Scheme Regulations 2006.

To satisfy the requirements at the time of a recognised transfer, the scheme must provide that, at least 70% of the funds transferred will be for the purpose of providing an income for life and benefits including any lump sum payment and income are payable no earlier than normal minimum retirement age (age 50 years).

The scheme manager must report to the UK HRMC any payment of benefit made to the scheme member during the first 5 tax years a member is resident overseas.

Permitted Investments
The terms of each individual QROPS Pension Trust will determine the permitted investments. Schemes generally permit a wide range of investments including cash, equities and securities, fixed interest bonds, government bonds, insurance bonds, mutual funds and OEIC.

UK Inheritance Tax
A transfer to a QROPS is not a chargeable event for the purposes of Inheritance tax. The funds held in QROPS are exempt from a UK Inheritance tax under provisions announced in the Finance Act 2008.

Benefits-
The terms and conditions of individual schemes will vary, however the main benefits of
transferring a UK Pension fund to a QROPS Pension include;

A transfer to a QROPS Pension provides the individual with the option to bring all of their UK pensions under one scheme. This can provide greater tax benefits, flexibility of investment choice and the potential for a more flexible choice of benefits.

The main alternatives for such schemes are schemes based on existing pension trusts utilising wrappers or International Insurance Bonds as the investment vehicle and bespoke schemes offered by pensioner trustees. The schemes are available from a range of jurisdictions including Hong Kong, Singapore, Australia, Ireland, Guernsey and the Isle of Man. Costs vary, however as a rule of thumb, combined schemes utilising a Pension Trust and a wrapper or International Insurance Bond are likely to be more expensive than bespoke schemes offered by Pensioner trustees.

Independent Advice
UK Pensions are varied and complicated; many have in built guarantees and protection. Guaranteed pensions, annuities, and death benefits may all be available from a preserved UK pension.  Before a transfer is contemplated an analysis of the costs and benefits must be completed by a professional adviser.  A transfer value and revue is essential to establish current value and review benefits.

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