UK taxman changes to QROPS rules may benefit expat retirement savers

Published:  16 Oct at 6 PM
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Whilst the ever-changing new UK rules regarding British pensions are confusing almost every saver and investor both on and offshore, HMRC’s recent QROPS announcement seems to bring good news for expat retirement savers.

Basically, the controversial Budget reforms are now to be applied to QROPS holders as well as to those with work-related or private pensions. However, according to the tax office, the finer details still need to be worked out and may result in modifications to the rules applicable to UK-based pension savers.

Possible adjustments are the tax rate which will apply to the reminder of a pension fund once the initial 25 per cent tax free amount has been drawn down. Options include a hybrid rate, a UK tax rate or a tax rate set by the financial jurisdiction in which the expat is living.

The new rules for QROPS are expected to include the 55-year age requirement for withdrawal, with no restriction on the total taken and no need to purchase an annuity. A few QROPs jurisdictions allow an initial 30 per cent tax free drawdown, although it’s still possible that HMRC may disallow this.

The tax due on the pension fund’s remaining 75 per cent will be calculated at the marginal rate paid by QROPS members in their tax-resident jurisdiction. Further changes such as a drop in the annual contribution threshold from £40,000 and £10,000 are in the pipeline, but even HMRC has admitted that it can’t give a date when all will be made clear to expat savers.
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