A Qualified Non UK Pension Scheme (QNUPS) offers flexible retirement planning options to British expats. Investing in a QNUPS has many advantages and are an option for anyone looking to emigrate and retire abroad where they can safeguard their assets and maximise their pension growth. A QNUPS offers numerous benefits but there are costs involved and each QNUPS has its own charges which vary between providers and jurisdictions.
There are various factors which determine the QNUPS costs of any particular scheme and it is recommended to thoroughly research any QNUPS fund with careful attention given to the charges and benefits of each scheme. When you take the advantages of investing in a QNUPS into account the costs are minimal but it is extremely important that you take note of these costs when assessing its viability.
Costs And Fees
Normally, there are three different QNUPS costs, some of these are a once-off, others are fixed and the balance based on a percentage basis. If you have a small pension fund then the costs may be quite high as a percentage of the pension asset value, but there are different QNUPS options available for different pension values.
Research your options and carefully weigh up each particular QNUPS costs and benefits as they vary according to the jurisdiction1 , service provider and particular fund you have chosen.
QNUPS Cost Types
- Setup costs – the setup costs for a QNUPS is usually a percentage of the value of the fund
- Annual management fees – the annual management fees fluctuate, depending on the fund
The costs involved with investing in a QNUPS2 are usually lower than QROPS charges and considering the benefits that are available, it is hugely advantageous for British expats living abroad to take a QNUPS. QNUPS differ from UK pensions where you lose 55% of your pension upon death, whereas with a QNUPS your pension fund remains largely intact and with greatly reduced or zero inheritance tax charges. Theoretically if a QNUPS cost you less than 55% of your fund amount to set up then it would make sense to opt for a QNUPS in most circumstances.
An investment in a QNUPS must provide sufficient tax reductions and other benefits to justify the setup costs. Investment regulations for QNUPS are flexible; you can hold a wide range of assets in a QNUPS, for example your own home and other properties (you can also take a loan from your QNUPS).
A QNUPS must be recognised for tax purposes and subject to taxation in the country in which it is established; the taxable amount payable3 on capital and income is determined by that jurisdiction in which you are resident. The main tax benefit associated with a QNUPS is the low or zero IHT payable on the member’s death.
Before making any decisions on investing in a QNUPS, potential clients should to talk to a reputable specialist adviser4 (who may charge for their services, but for the most part, their fees are linked to performance). The potential savings and growth they can generate with your QNUPS pension fund will far outweigh their costs.
In February 2010, the UK government introduced QNUPS (Qualifying Non UK Pensions Scheme) which allows those British expats who have retired overseas to invest in a pension fund which has reduced tax liabilities.
There are huge benefits for individuals investing in a QNUPS as they don’t have the same restrictions as a UK-based pension; this includes having more control over their pension planning, investment flexibility and tax relief.
There are some tax implications5 to consider before investing in a QNUPS scheme.
QNUPS are subject to legislation by HMRC (Her Majesty’s Revenue and Customs) which approves overseas pensions which meets certain criteria, provided that it is regulated and taxed as a pension in the jurisdiction where it is based and you are resident.
Investing in a QNUPS fund does not imply that you are exempt from paying tax, you will be liable for tax and the amount of tax payable will depend upon the jurisdiction, income and capital received from your QNUPS.
QNUPS has exceptional tax relief in that is exempt from (or has greatly reduced) inheritance tax on the pension fund. A QNUPS offers British citizens who are resident abroad a legal way to mitigate IHT where assets are safeguarded in an offshore pension scheme. A QNUPS ensures that the assets built up during an individual’s lifetime can be passed on their beneficiaries with substantial tax savings.
The tax implications of investing in a QNUPS need to be evaluated; the rate of taxation that a QNUPS in a specific jurisdiction attracts must be fully understood. Additionally the tax benefits should be accurately measured; they must outweigh the set-up costs and charges associated with investing in a QNUPS.
It is not a requirement to invest in a QNUPS where you are currently resident; a QNUPS can be in a jurisdiction where the tax regulations are more favourable i.e. where the rate of income tax is lower.
Tax Charges On Your Estate
In the UK a pension scheme is not regarded as an asset to be passed on to your heirs whereas a QNUPS is classified as a pension while avoiding IHT estate duty. This tax relief means your beneficiaries can benefit from the entire value of your pension fund, making it an effective estate planning tool.
A QNUPS can hold a wide range of assets including cash and property; the complexity of QNUPS investment options and tax implications vary from one jurisdiction to another so it is recommended that you seek professional advice before investing in a QNUPS. A specialist financial adviser will be able to offer you the best QNUPS options in your chosen jurisdiction to safeguard your investment and maximise your returns whilst taking into account your specific requirements and circumstances.
British expats who are looking to retire overseas permanently have a number of frequently asked questions with regards the transfer of their assets to a QNUPS.
Here we answer some of the questions and offer advice and explain the benefits and exceptional tax savings.
What Is A QNUPS?
A QNUPS (Qualified Non-UK Pension Schemes) is an HMRC approved pension scheme based outside the UK. QNUPS pension plans were introduced in 2010 by the British authorities to facilitate the ease of asset transfer to a fund in another country.
British expats who retire abroad now have more flexibility and control over their pension plans. Investors can receive their pension without difficulty while safeguarding their assets and maximising their retirement benefits when they transfer to a QNUPS.
Which QNUPS Jurisdiction?
An understanding of the key factors and benefits that are offered by a particular QNUPS is the first step in choosing where to transfer your pension scheme. A QNUPS jurisdiction ought to be chosen according to your individual needs; some schemes offer benefits with more tax relief and others are selected for their investment flexibility.It is a priority to invest in a politically stable QNUPS jurisdiction that has a well respected financial system with sound regulation.
Do I Qualify For A QNUPS?
There are certain requirements that need to be fulfiled before establishing a QNUPS, you need to be able to answer ‘Yes’ to the following:
- Are you a British citizen residing permanently outside the UK?
- Are you over 18 years of age?
- Do you have cash and other assets to invest?
What Are The QNUPS Costs?
Each QNUPS has its own charges which vary between jurisdictions and providers. Before transferring to a QNUPS, individuals need to have a thorough understanding of the costs involved in establishing a QNUPS as well as the recommended minimum values. When looking at the exceptional benefits of investing in a QNUPS, the costs are minimal but are usually higher than the normal UK pension costs. There are set-up costs, management fees and underlying fund management charges.
What Are The QNUPS Tax Implications?
A QNUPS is a tax efficient pension fund, the amount of tax payable on income and capital received is determined by the tax regime of the jurisdiction in which it is based. The most significant tax advantage is the greatly reduced or zero inheritance tax charged to the fund on the member’s death, thus allowing the fund’s assets to be passed onto the beneficiaries intact.
What Types Of Assets Can A QNUPS Hold?
QNUPS offer very flexible investment options; it not necessary to liquidate your assets prior to investing in a QNUPS as they can hold a wide range of assets including cash, property and other assets.
What Are The Implications For My QNUPS If I Move?
If you meet the criteria and have sufficient funds to justify the set-up costs, then transferring your assets to a QNUPS is straightforward. It is important to note that there are restrictions on your length of stay back in Britain before UK taxes apply (after you’ve retired overseas and taken advantage of the QNUPS benefits).
A QNUPS provides British expats with an opportunity to invest their assets in a pension fund offshore, it has flexible investment options and tax benefits which would not normally be allowed in the UK. Individuals who are retiring overseas should contact specialist financial advisers who will take into account your particular needs and objectives when offering advice on the opportunities and benefits of investing in a QNUPS.