QROPS Pension Transfer Tax Implications

The tax implications of a QROPS Pension Transfer are a very complex field that varies across jurisdictions.

  • The transfer to a QROPS is a Benefit Crystallization event and is not subject to taxation unless it exceeds an individual’s lifetime allowance.

Lifetime Allowance

Tax Year Lifetime Allowance / Member
2008/2009 £1,650,000
2009/2010 £1,750,000
2010/2011 £1,850,000

It may be possible in certain circumstances to be in receipt of a higher Lifetime Allowance. This may be the case if an individual:

  • Contributes to a UK recognized pension scheme whilst residing abroad.
  • Transfers an overseas pension scheme into a QROPS without receiving any income tax relief.
  • Has accumulated pension funds prior to 6th April 2006 (known as ‘A’ Day) and has registered with HMRC for either ‘primary’ or ‘enhanced’ protection.

Your lifetime allowance does not restrict the amount of money you are able to hold in your UK Pension, but it does restrict the amount of benefit you are able to transfer from your existing UK Pension into a QROPS without any surplus tax charge.

Once you have used up your Lifetime Allowance allocation, any benefits paid will be subject to a Lifetime Allowance charge. Should you wish to take excess monies above the Lifetime Allowance as a lump sum, the surplus tax charge to be deducted will amount to 55% of this withdrawal.

If you wish to take the surplus monies as a pension, you will be charged 25% of the excess prior to the pension being paid. These tax charges are deducted from your fund and paid to HMRC, prior to payment of benefits to you.

Tax Charges on QROPS Withdrawals in the First Five Tax Years?

“Authorised payments” from a QROPS during this period do not attract a tax charge and include:

  • Transferring funds from a QROPS to another QROPS.
  • Withdrawals made after you reach retirement age – generally age 50 (55 if you were born after 5 April 1960).
  • On your death payment of any benefit owing to you.

An unauthorised payment charge of 40%+ of the amount involved may apply, if before five complete tax years of your being non UK resident:

  • You make a withdrawal from the fund before you reach retirement age.
  • You transfer your UK pension scheme from a QROPS, to a scheme which is not a UK registered pension scheme.
  • The QROPS makes a payment on your behalf for hardship reasons.
  • You take more than 25% of your fund as a lump-sum payment on reaching retirement age.

If you make a withdrawal in excess of 25% of the value of the QROPS, before you reach retirement age, you may be liable for an unauthorised payment surcharge of 15% of the amount involved.