QROPS Jurisdiction

QROPS Pension Transfer

Deciding on the jurisdiction of your QROPS Pension Transfer is one of the most important decisions you will need to make.

These are some of the factors that are extremely important:

  • You should ensure that it is in a tax-efficient & secure jurisdiction.
  • It should have strong investor principles similar to  the UK.
  • The jurisdiction should offer significant improvement in investment and benefit options available. For example, some jurisdictions require you to purchase an annuity, and place major restrictions on the funds you can go into.
  • A jurisdiction such as the Isle of Man, Jersey, or Guernsey would be optimal, as they offer tax efficiency, flexibility, strong investor principles are are denominated in a strong currency.
  • Guernsey is probably the best option of these as it offers the greatest flexibility.

At the risk of repetition (it’s that important!), the jurisdiction that you choose for your QROPS is a vital factor to consider before transferring your frozen UK pension.

QROPS – Jurisdictions in Comparison

  Isle of Man Guernsey Hong Kong
Is Income Drawdown Available? Yes. Subject to UK GAD rates, both USP and ASP. Income will be paid less 18% tax. First £2,120 (tax year 2009/10) per annum of income is paid gross (for non-IOM resident). Yes. During first  years of non-UK residency income is subject to UK GAD rates, both USP and ASP. After 5 full years of non-UK residency benefits may be paid under more flexible Guernsey rules. Income is paid gross. Yes. Income is not subject to UK GAD rates. Income is paid gross.
What is the Maximum amount of lump sum available at normal retirement age? 25% Without penalty but increases to 30% after 5 full years of non-UK residency. Subject to trustee discretion. During first 5 years of non-UK residency 25% of tax relieved funds transferred. After 5 full years of non-UK residency 25% of fund. Subject to trustee discretion. Any payments are subject to trustee discretion.
How is the pension payable calculated? Using either UK Government Actuary tables as per UK’s  Unsecured/Alternatively Secured Pensions. Actuarially certified by scheme provider. No insurance annuity required, payments made gross. Subject to UK rules and GAD tables with less than 5 years of non UK residence, otherwise more flexible Guernsey rules may apply. Actuarial tables and Modern Portfolio Theory.
What happens if the client dies before retirement (during the first 5 years of non-UK residency)? 100% return of fund to deceased’s estate/nomination with 0% tax charge or a spouse’s/dependant’s pension could be paid, subject to tax at applicable rates. Balance of fund payable in accordance with member’s wishes. No Guernsey tax is payable pre-retirement. 100% of fund by-passing Probate to dependant.
What happens if the client dies before retirement (after 5 years of non-UK residency)? Post retirement pre 75, return of fund less 35% tax charge. Post retirement post 75, return of fund less tax charge up to 82%. Alternatively, in both cases, a spouse’s/dependant’s pension could be paid. Balance of fund payable in accordance with member’s wishes. No Guernsey tax is payable pre-retirement. 100% of fund by-passing Probate to dependant.
What happes if the client dies after retirement (during the first 5 years of non-UK residency)?   Post retirement pre 75, return of fund less 35% tax charge. Post retirement post 75, return of fund less tax. Post retirement pre 75, return of fund less 35% tax charge. Post retirement post 75, return of fund less tax charge up to 82%. Alternatively, in both cases, a spouse’s/dependant’s pension could be paid.
What happens if the client dies after retirement (after 5 years of non-UK residency)? Post retirement pre and post 75, return of fund less 7.5% tax charge, or a spouse’s/dependant’s pension could be paid. 5 Years+ (pre & post 75)A) a spouse’s/dependant’s pension may be paid.

B)No Guernsey tax and 100% paid to whoever is nominated by the member.

C) Not reportable to HMRC.

100% of fund by-passing Probate to dependant.
What are the tax rates on taking a pension if the client is resident in the same jurisdiction as the QROPS? Single Personal allowance is £9,200 (tax year 2009/10). 10% band on income up to £10,500. Balance at 18%. 20% tax. 0% tax.
What are the tax rates on taking a pension if the client is resident outside of the jurisdiction of the QROPS? Single personal allowance of £2,120 (tax year 2009/10). Balance is subject to 18%. May be subject to double taxation if country of residence taxes pension income. No Guernsey tax but there may be taxes in the country which the client is resident. No Hong Kong tax but there may be taxes in the country in which the client is resident.
(Table Courtesy of Royal London 360°)

For more information, read Further Questions and Answers on Jurisdictions.

Contact us to get in touch with a QROPS specialist who will be able to discuss the various jurisdictions with you in detail.