The Ultimate QNUPS Guide
Understanding QNUPS Benefits
Globalisation has had a huge impact on the flow of money worldwide. With several people choosing job opportunities abroad there has been an increased demand for more flexible investment options. Along with these new opportunities, the responsibility to provide adequate pension schemes has risen. QNUPS was created in 2010 after the introduction of QROPS in 2006.
Find out more by reading through our QNUPS guide.
What Is A QNUPS?
It is a Qualifying Non-UK Pension Scheme.1 This was introduced to rectify a mistake that was made in the 2004 Finance Act. Our QNUPS guide will take you through everything you need to know about the scheme. The 2004 Finance Act stated that money placed in a Qualifying Non-UK Pension Scheme would be subject to UK inheritance tax in the event of the death of the holder. However, with the introduction of QNUPS, any money transferred to the scheme will not be subject to inheritance tax.
QNUPS is the answer to many UK domiciled individuals as it offers them an opportunity that is unique, efficient and easy to access as the minimum age to acquire a Qualifying Non-UK Pension Scheme is just 18 years. The “Qualifying” part means that the overseas pension scheme must meet Her Majesty’s Revenue & Customs strict criteria for pension schemes that will not attract UK inheritance tax.
Who Can Qualify?
Another popular question that we wanted to include in our QNUPS guide is ‘Who can qualify?’ This pension scheme is open to anyone who is a resident in the UK or those who have moved out of the United Kingdom but have retained their UK domicile status for IHT. To qualify the individual should be overseas, and are not restricted to countries with Double Taxation Agreements with the United Kingdom.
Is It A Good Option For Me?
One of the major reasons is that you will be exempt from UK inheritance tax. This enables a QNUPS scheme holder to pass on all of their assets to their beneficiary. One of the other reasons is that QNUPS can accept money that has not been earned in employment. You also do not need to make any lifetime contribution. There is no maximum age at which you can make payments into a scheme.
What Can Be Included?
With a QNUPS, you can put in almost anything you like including residential property and just about any kind of assets2 that are traditionally associated with retirement funding. QNUPS can also hold things like antiques and fine wines.
When And What Can You Take Out?
Similar to any UK private pension scheme, you can only access your benefits after the age of 55. However, it could be possible to get a loan from the scheme before you reach the age of 55. Depending on the scheme’s rules, you may be permitted you to access larger tax free lump sums3 earlier than a normal UK pension. Continue reading our QNUPS guide for all the assets that can be included.
How Much Do I Need To Invest?
Though QNUPS and QROPS4 are both overseas pension schemes, some of the benefits of QNUPS are outstanding. This is especially in the area of its flexibility in accepting assets as well as cash and its most popular UK inheritance tax charge mitigation. However, when it comes to QNUPS minimum values there are certain factors that should be considered. Make sure you are well informed before getting a private pension plan! Luckily for you we have all the information you need!
There is no stipulated minimum value. However, as you will discover in reading this QNUPS guide, you need to be aware that UK tax charges may be applicable if an individual exceeds the UK Lifetime Allowance limit. The current UK lifetime allowance limit 2011/2012 stands at £1.5 million. Although there is technically no minimum value to transfer your pension, service providers recommend a minimum amount of £100,000.
This is because the running costs of the selected pension scheme. Any transfer amount less than £100,000 is not likely to be viable. Though there have been cases where £75,000 has been transferred to a scheme, advisers recommend to keep the figure at £100,000. Hence the minimum value can be as low as £100,000.
However, in certain cases, personal circumstances and trustee discretion could be taken into consideration and have the minimum limits lowered for a transfer. It’s important to know how to choose the best QNUPS Jurisdiction for you. Make sure you are well informed! You can find all the information on our site.
You will need to take into account which jurisdiction5 you are using for your scheme. Benefits received are not taxable in the United Kingdom; however, you need to check whether you will be taxed in the jurisdiction in which the scheme is held.
In view of this, Advisers recommend a QNUPS minimum value of £100,000. It is also recommended to talk to your adviser for specific minimum value.
The Difference Between QNUPS And QROPS
Both offer various benefits, both are parked offshore but both are not the same. In the QNUPS guide we have detailed the main differences. It is important to understand the difference in structure and implication between QROPS and QNUPS to be able to evaluate which would be more useful in one’s circumstances.
Here are a few things that show the different schemes side by side:
- An individual taking a QROPS should be living outside the UK or should live outside the United Kingdom for tax purposes for at least 5 years
- An individual taking a QNUPS can be resident in the United Kingdom or in any part of the world but who have retained UK domicile status
- QROPS are open to anyone with a UK pension, both UK residents and foreigners who have been working in the UK but who are now residing in another country
- QNUPS is open to any UK resident and to UK domiciled residents currently living in another country, not necessarily in countries that have signed the Double Taxation Agreement with the United Kingdom.
- Every QROPS has to be reported to the HMRC for 5 years after you have left the United Kingdom
- With a QNUPS, you do not have to report it to the HMRC
- With QROPS, once you have taken an initial lump sum, you can only derive income from what is left of your funds
- With QNUPS, you can continue to invest into the scheme even after taking an initial lump sum
- There is NO maximum age for taking a QNUPS
- In most cases assets will have to be liquidated before it can be transferred to a QROPS. Not all QROPS schemes accept assets before liquidation.
- With QNUPS, assets do not have to be liquidated before transferring them to a QNUPS. You can transfer just about anything you like, such as; antiques, residential property, fine vintage wines including other assets.
- QROPS offers less confidentiality as all schemes must be reported to the HMRC.
With a QNUPS, there is much more confidentiality as schemes do not have to be reported to the HMRC. This is because QNUPS countries are not required to have Double Taxation Agreements with the United Kingdom. Therefore all QNUPS do not have to be reported to the HMRC, unlike for a QROPS which has to be reported for the first 5 tax years.
- With QROPS, assets can be classified as “estates” and can attract inheritance tax charges
- WITH QNUPS, there is no inheritance charge that is levied upon the named beneficiaries
When comparing QNUPS vs QROPS there are vast differences between the two, though both are overseas pension schemes. You can talk to our financial adviser if you want to compare QNUPS vs QROPS in more detail.
What You Need To Do Next
Because of its flexibility and tax efficient factors, it is recommended for those wanting to transfer their UK pensions, assets offshore where it can grow and generate gains that will not be lost by way of heavy taxes. As you may have gathered through reading this QNUPS guide, there is no one size fits all and it is imperative that you consult with an adviser regarding your specific needs.
We Will Guide You Through The Steps
These next steps in the QNUPS guide will help you prepare to transfer your retirement plan. When comparing QNUPS vs QROPS there are vast differences between the two, though both are overseas pension schemes. You can talk to our financial adviser if you want to compare QNUPS vs QROPS in more detail.
1. Check If You Qualify
To be eligible to transfer your UK pension you need to be at least 18 years old. The scheme is open to UK residents as well as UK domiciled residents who are currently living abroad. However, if you are planning to return to the UK at a later time, then you will lose IHT exemption and you will be liable for IHT under UK tax laws.
2. Chat To Someone About It
The second step is to get sound advice. Find out about transferring your UK pension – we can help by putting you in touch with a reputable registered financial adviser in your area (free and without obligation). You can decide what you want to invest after talking to the adviser and he will guide you in the process of setting up the transfer.
3. Download Our QNUPS Guide
Download our comprehensive QNUPS guide and understand all that you need to know about the benefits of the scheme. Our QNUPS guide will answer most of your questions. You can also contact us and our reputable registered financial adviser will contact you and help you process the transfer.
4. Moving Forward
Once you have spoken to our financial adviser, and after you have understood the various factors, you can choose to start the transfer process. Any questions you may have regarding mitigating from the UK inheritance tax charge can be discussed with the adviser.
5. Start the Transfer
Now for the most important step. Our reputable registered financial adviser will arrange for your pension, assets or both to be transferred to your new pension scheme. You are now on your way to protecting your assets and parking it in a place where it can grow and reap dividends.
6. How Long Will It Take To Transfer?
Transferring does not require liquidating your assets before they are transferred, so the time taken will be considerably less. However, each transfer is unique and your financial adviser will be able to give you a more accurate time limit after assessing your scheme.
7. Enjoy Your Benefits
Once your transfer is through, you can sit back and relax knowing that your investments are working for you. You can also rest easy knowing that you do not have to lose any money by way of IHT and capital gain tax.
A QNUPS pension scheme provides for easy transfer of all your remaining assets and capital gains to your named beneficiaries without the loss of IHT to the taxman.
Letting Your Investments Grow
Any UK resident or UK domiciled individual taking a QNUPS will not have to pay any inheritance tax and all the assets of the scheme taken will be transferred to the named beneficiary upon death of the holder. There are various QNUPS benefits that you can receive when you take a QNUPS transfer.
What Are The Benefits?
The benefits outlined below are generally applicable. However, due to the technicalities involved in each individual case it is important to check this with your financial adviser.
- Free from Inheritance Tax and other local taxes for which you might be liable
- No Maximum Limit for what can be invested in this scheme
- No Maximum Age for contributions
- Tax efficient, in many cases may avoid local wealth taxes
- Contributions do not need to be made from earned income
- Growth is free from CGT (Capital Gains Tax) which means the capital growth of your assets can be passed on in full to your beneficiaries
- The QNUPS guide covers the main benefits, but your situation may be different
Free From Inheritance Tax
Introduced in February 2010 by the UK government, schemes have been designated by a set of rules that confirming that certain offshore pension schemes would not be subject to the UK’s Inheritance Tax.
By taking a QNUPS an individual can shelter his/her assets in an offshore pension scheme. It is a legitimate way of mitigating your inheritance tax bill.
One of the other benefits is that it does not only have to be located in countries that have signed the Double Taxation Agreement with the United Kingdom. This is very advantageous as it has two significant issues. Firstly, since it does not have to be located in country with a DTA, there needs to be no reporting requirements. So the scheme does not have to be reported to HMRC.
Secondly, schemes can be hosted is several other countries thereby giving you wider choice.
No Maximum Limit
There is no maximum limit on how much can be transferred. Other offshore pension schemes might have a limit, but you can decide how much you want to invest.
No Maximum Age for Contributions
Unlike other overseas pension schemes, Тhere is no maximum age limit to contribute to a QNUPS. You can contribute for as long as you like.
The most important part of taking a QNUPS is that your assets including capital gains are passed on to your named beneficiaries without any tax implications.In other pension schemes as much as 40% could be charged as tax.
Another one of the benefits is the contributions is unlimited and can be made from a variety of sources. Contributions need not only be made from income earned but from assets acquired by you in any way. Assets do not have to be liquidated prior to transfer. Residential property, antiques and even fine vintage wines are accepted.
No Capital Gains Tax
Another one of the popular benefits is that you will not be taxed for your capital gains. The full capital growth of your assets will be passed on to your beneficiaries.
Take A Detailed Look At The Assets That Can Be Included
A QNUPS can be taken by anyone who is a UK resident or any UK domiciled individual currently residing outside the United Kingdom. You can transfer just about anything with a QNUPS assets transfer.
What Can Be Transferred
This QNUPS guide covers the general inclusions, but there are many more. Investors have the opportunity to move a wide range of assets into the scheme. Schemes may hold investments, assets, residential property and cash. In addition to this, transfer of unconventional assets such as an antique collection and wine are also allowed to be transferred.
This provides pension holders the ability to hold a wide range of assets with their structure, providing increased tax protection on a broader collection of assets. Because of the flexibility that a transfer offers, it has become one of the most popular offshore pension schemes in the UK. In comparison to QROPS, a QNUPS offers more investment options for individuals who might want to invest and increase their assets and offers greater flexibility.
Since a transfer allows for the inclusion of assets and other items, there is no need to liquidate the assets first before transfer.This allows individuals to hold property or antiques in their scheme and pass them onto their named beneficiaries. In stark contrast to other IHT planning steps, when assets are transferred to a scheme the IHT mitigation is immediate. You do not have to wait for seven years following the date of the transfer for the IHT to become effective.
All asset growth and capital gains are passed on to the beneficiaries. So in effect, all assets that you transfer grow and the assets together with the benefits are safeguarded. It is ideal because you can transfer unconventional assets.
Check If You Qualify
The scheme is available to UK residents and non-UK residents. Here are some things you need to know about eligibility. Anyone who is a UK domiciled resident can use a QNUPS.
Remember this – as part of the QNUPS guide: one of the biggest benefits is that you will be exempt from the UK inheritance tax charge. However, it should be noted that if a scheme holder returns to the UK within 5 years of taking the scheme, then his/her inheritance tax exempt status will be lost and the individual will be subject to the UK’s inheritance tax charge.
Any person who is a UK resident, or who have moved outside the United Kingdom but have maintained their UK domicile status is eligible. When considering a this option, the citizen’s domiciled status is a key factor in determining if their wealth will be subject to the UK inheritance tax charge.
Generally speaking, a person is considered to be domiciled in the country where their permanent home is located. That is, if a person is staying in France but his permanent home is in the UK, then he is considered to be domiciled in the United Kingdom. The law stipulates that a tax payer can have only one domicile at a time.
Minimum Age Limit
The minimum age limit for a QNUPS is 18 years. There is no maximum age limit, unlike other overseas pension schemes.
Other Eligibility Factors
Other factors that are connected to eligibility include:
- All UK domiciled persons and UK residents are eligible and can make pension contributions in excess of the UK maximum limits. UK domiciled persons can be residing in any country not necessarily only in countries that have signed the Double Taxation Agreement with the United Kingdom.
- UK non-residents, who already have a QROPS, should talk to their financial advisers to see if they are eligible in case they wish to increase their pension contribution.
- Individuals who think it is a priority to save on the UK inheritance tax charge, their earned income and also for other assets they might have as well.
- Individuals looking to consolidate their assets including other investments and savings in a less regulated pension environment.
It should be noted that ONLY non-investment QROPS can be transferred, otherwise there will be a 55% unauthorised payment charge levied on the individual. For those who are looking to transfer funds from an investment regulated QROPS to a QNUPS, the funds invested in an investment regulated QROPS should first be transferred to a non-investment regulated QROPS.
Once this is done, the individual can start the process of transferring funds from the QROPS. In all cases it is advisable to talk to your financial adviser. You can also contact us and we will help you with any queries you may have regarding eligibility. You can contact us and we will arrange for our reputed financial adviser to give you a detailed explanation of the information that we’ve included in this QNUPS guide.
Taking a QNUPS can prove quite advantageous
For any UK resident or UK domiciled resident. Qualifying Non-UK Pension Schemes provides a legal way of mitigating the UK Inheritance Tax charge. There are very few drawbacks to opening a Qualifying Non-UK Pension Schemes. The scheme provides great personal benefits and the tax benefits are astounding. Costs are extremely reasonable unlike in a QROPS where the charges are much more.
What Are The Costs To Transfer To A Qualifying Non-UK Pension Scheme
All accounts are set up with a predetermined fee structure. There are three categories of fees that are payable in a QNUPS. These are the costs you will incur. Find Out More About QNUPS.
Onetime Setup Fee
You will need to pay a onetime set up fee. This is not a big amount as compared to QROPS. The cost of setting up is much lower than a QROPS. You do not have to worry about whether your benefits will cover the expenses incurred as the costs are low making it one of the popular overseas pension schemes. Costs for each QNUPS are not the same and your financial adviser will be able to give you an exact quote from the service providers.
Annual Maintenance Fee
Again, the annual maintenance fee is much lower compared to a QROPS. Depending on the particular scheme you are taking, your financial adviser will be able to determine the annual maintenance fee and let you know before you actually make the pension transfer.
There may be additional fees depending on what specific action you may wish to take that could be added to costs. However, whatever you may choose to do, all fees are clearly itemised during the set up process. It is recommended to go through the scheme carefully and talk to your financial adviser if you are unclear about some part or want clarification about any additional fee that is going to be charged.
Some advisers charge fees by the hour. However, it is unlikely that your adviser will charge you any fees as providers normally pay advisers a certain commission. In comparison to QROPS which is also an overseas pension scheme, QNUPS costs are very reasonable and the benefits are excellent, thereby making it very cost effective.
What Are The Taxes?
Though there are no UK inheritance tax and capital gain tax to be paid. Yet, investors need to confirm that there will be no low tax bills to pay in the country where the QNUPS is based. You will have to talk to your financial adviser and check if there would be any tax payable after a certain number of years. You will have to check the tax options available in various QNUPS countries before you decide where you want to transfer your pension.
In February 2010, the UK government introduced the QNUPS guide, which stands for Qualifying Non UK Pensions Scheme. This term acknowledges the fact that certain overseas pension schemes are not subject to Inheritance Tax in the UK. Here’s what you need to know about tax implications.
Qualifying Non-UK Pension Schemes therefore offers a legal and tested method for mitigating IHT whereby assets are sheltered in an offshore (overseas) pension scheme. A QNUPS guide therefore ensures that the assets built up during an individual’s lifetime can be passed on to beneficiaries with substantial tax savings. These QUNPS tax implications will help you plan which scheme to take. You can have great advantages if you choose the correct QNUPS Jurisdiction.
What Are The Benefits?
Reading through our QNUPS guide, you may have notes that it is quite similar to QROPS in structure although you can enjoy its benefits without being subjected to the restrictions that QROPS is known for. QNUPS tax implications are different from that of QROPS.
- It is not limited to countries that have signed the double taxation agreement with the United Kingdom
- You are free from any reporting obligations to the HMRC. Nevertheless, there are particular countries which allow authorities from the Tax Information Exchange Agreements to report any suspected fraud.
Once you have finished reading through this QNUPS guide, make sure you check our in depth article on QNUPS benefits.
IHT And CGT
- UK residents and domiciled individuals have long been concerned about the impact of inheritance tax to their assets and investments. A Qualifying Non-UK Pension Schemes is a legal way to shelter their assets and investments and mitigate the high rate of the UK inheritance tax charge.
- The holder can pass on the assets and investments to his/her heirs without any substantial tax obligations, therefore, a legal and most efficient method to mitigate IHT.
- The assets are exempt from the Capital Gains Tax (CGT), therefore, additional savings and growth for your investment, which your beneficiaries can fully enjoy when it is passed on to them. This is of vital importance for high net worth individuals who are required to pay the increased CGT rates.
Why It Is A More Reliable Saving Scheme?
Because of its instant protection for your cash contribution and assets as soon as it is transferred. This means that even if something happens to the holder right after setting up, their beneficiaries can take the assets/funds without any death duties. Other IHT saving schemes only provides protection for the assets from inheritance tax after several years of signing up to the particular saving scheme.
- UK residents and domiciled individuals with high net worth and substantial levels of income need not worry about tax obligations in their pension contributions.
It allows your investment to grow in a tax-free environmentCLICK TO TWEET
, which makes it the ideal option for high earners and for anyone who have already reached maximum funding limit for their UK pensions.
- As we have noted previously in the QNUPS guide, other domestic and foreign pension schemes are not exempt from the rules of maximum lifetime contributions. Here, there is no maximum limit.
The complexity of the Qualifying Non-UK Pension Schemes tax implications varies in different jurisdictions. You will need to speak to your financial adviser to know if the jurisdiction you choose has any tax charges that will be imposed on benefits gained after the initial 5 years.
Do you know about all the QNUPS Benefits and Assets you can take advantage of? Make sure you are well informed for your investment decisions and that you have taken note of the important information in this QNUPS guide.
QNUPS Guide FAQ
Qualifying Non-UK Pension Schemes have been recently introduced by the HMRC and offer individuals a number of benefits including substantial tax savings.
What Are QNUPS?
They were introduced on 15 February 2010 by the HMRC and is a regulated tax efficient pension scheme which allows investment of wealth overseas. Although it is a pension fund it does have a degree of flexibility and has some significant tax advantages as we have detailed in this QNUPS guide.
Who Is Allowed To Invest?
Anyone is eligible to invest in a Qualifying Non-UK Pension Schemes unless the country where you are resident specifically excludes this.
What Are The Advantages?
Anyone is eligible to invest in a Qualifying Non-UK Pension Schemes unless the country where you are resident specifically excludes this.
- Tax efficient – local taxes and inheritance tax
- Tax free asset growth
- No maximum age limit for investing into scheme
- No maximum limit on the amount invested
- Decide who will inherit funds and assets by designating beneficiaries
- Avoid local wealth taxes in most jurisdictions
- Not necessary to receive income from employment to make contributions
- May hold assets such as property, investments, arts and antiques
How Does It Differ From A QROPS?
- No reporting requirements to the HMRC, whereas with a QROPS, it is a prerequisite to report to the HMRC for 5 years after you have left the UK.
- Allowance for continued investment into the scheme after taking an initial lump sum, whereas with a QROPS, once you have taken an initial lump sum you only derive an income from the funds that are left.
If there are questions that our QNUPS guide hasn’t answered, please get in touch.
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