When is a QROPS a QNUPs and vice versa

Published:  21 Jul at 6 PM
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For expats living overseas and fast approaching retirement age, investing their pension pot in the most tax effective manner can be very confusing.

QROPS, QNUPS and SIPPS have been around for some years now, but many soon-to-be retirees could be forgiven for being totally confused as to which is more beneficial foe them. Basically, all Qualifying Recognised Overseas Pension Schemes, (QROPS) are also Qualifying Non-UK Pension Schemes (QNUPS), but a QNUPS may not necessarily be a QROPS. Got it?

Taking the better-known QROPS first, it’s simply a regulated pension recognised by HMRC and taken out overseas. It enjoys exemption from the dreaded inheritance tax and is not taxed in the UK, but unauthorised payments over a certain limit are penalised by heavy HMRC charges.

On the other hand, QNUPS are equally simply a set of rules, and are not a financial product or financial service. Pension schemes meeting the criteria are also exempt from inheritance tax, with the exception that the tax will apply should the HMRC decide the pension was taken out to avoid it.

Another important QNUPS difference is that unauthorised payments taken out from a QNUPS which is not classified as a QROPS do not attract HMRC penalty taxes. Also, the HMRC’s QROPS reporting requirements do not apply to QNUPS, making them a tax-free tool for investing pension pots away from UK inheritance tax rules.

However, the most important difference between the two is that a QNUPS does not have to be administered by an overseas jurisdiction which has a double tax agreement between the investor’s country of residence and the UK. A major problem for expats considering either of the schemes is that HMRC guidance is far more comprehensive for UK-based pensions than it is for those based overseas, leaving the onus on expat retirees to select a competent, experienced financial advisor.
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