QROPS & QNUPS – What Is The Difference?
QROPS (Qualifying Recognised Overseas Pension Scheme) and QNUPS (Qualifying Non-UK Pension Schemes) are both tax efficient retirement planning schemes for former UK residents. You do not have to hold a QROPS to take out a QNUPS or vice versa. You can hold both at the same time. Both schemes require that 70% of the assets in the scheme are held to provide income in retirement.
A QROPS allows you to transfer existing UK based pension schemes into a single pension plan and obtain potentially higher income that you would with a UK based pension scheme(s) and even pay less tax at the same time. A QNUPS allows you to invest (or transfer other investments and savings) into a non-UK Pension Scheme whether you are working or not and you can decide whether you receive an income. There is no age restriction on when you make an investment into a QNUPS.
The main difference between a QROPS and a QNUPs relates to the contributions. Income Tax releif will have been given on the income used for the contributions to the UK pension scheme(s). Contributions to a QNUPS are made from taxed income.
Both schemes allow you to receive a tax free cash lump sum of 25% (sometimes 30%) of the fund. You may have to pay income tax on the income you receive but the amount you pay is based on the rules of the country in which the QROPS or QNUPS is set up and where you are resident.
The type of investments allowed in a QROPS is set by the rules of the country in which it is set up and is usually restricted to a range of investment funds offered by the company. With a QNUPS you can invest in a much wider range of investments including fine wines, residential property or antiques.
The rules laid down by HMRC about the approval and regulation of a QROPS are much more complex than those for a QNUPS. Further a QROPS can cease to qualify as one and if this happens you could be liable to UK tax on your fund. Therefore it is important that you get advice from a suitably qualified adviser. We can arrange for an adviser to contact you when you give us your details.
The main differences can be summed up:-
|Can I transfer a UK based Pension Scheme?||Yes||No|
|Is there a maximum age for starting a plan?||Yes||No|
|Is there a limit to the amount that can be invested?||Yes*||No|
|Can I make contributions?||Some schemes||Yes (at any age)|
|Can I transfer other investments (i.e. shares) into it?||No||Yes|
|Can I take a tax free cash lump sum?||Yes||Yes|
|Can I draw a regular income?||Yes||Yes|
|Is there any Inheritance Tax liability on death?**||Depends||No|
|Can I return to the UK and keep the plan?||Yes||Yes|
|Are there any reporting requirements to HMRC?||Yes||No, unless it holds QROPS assets.|
* There is a limit of £1.5m that can be transferred out of UK pension schemes without any tax liability. Amounts over the limit are subject to a deduction for UK tax before the transfer.
**Assuming you are classed as UK domiciled for Inheritance Tax purposes which is different to being non resident for income tax.
As there are a number of differences between a QROPS and a QNUPS you should take independent financial advice from an expert in the field. We can arrange for an adviser to contact you when you give us your details.
The information given in this article is strictly for information purposes only and is not to be construed as financial advice.
For more information on QROPS visit the HMRC website here.