QROPS aces in the tax hole for permanent expat residents

Published:  30 Oct at 6 PM
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QROPS are still a good choice for expats living permanently overseas as they give significant tax advantages in addition to conforming to the new pension rules.

Overseas workers and expats who’ve reached retirement will benefit tax-wise from a QROPS, provided they have left the UK on a permanent basis. According to the Treasury, the new pension rules announced in the March budget speech will apply to QROPS, although the final wording has yet to be drafted.

Whatever the result, QROPS will still be a good deal for those who wish to continue to invest their capital rather than draw it all down for the spending spree of a lifetime. At present, the small print in a number of QROPS allows retirement savers a tax-free 30 per cent drawdown at age 55, the point of retirement as from 6 April next year.

However the lump sum drawdown limit for UK-resident pensioners is expected to be 25 per cent, giving a total tax-free £37,500 on a pension pot of £150,000. Non-resident and non-domiciled expats should be able to take the full 30 per cent, giving £45,000 tax free on the same savings.

However, the QROPS trump card for expats is that, whilst retirees in the UK will need to pay income tax on the balance at their marginal rates, those living in low-tax jurisdictions will only pay at the marginal rate in their host country. For example, Dubai charges zero per cent and Gibraltar’s marginal rate comes in at 2.5 per cent, a considerable saving on rates in, say, France or Spain.

Obviously, careful expat tax planning using a QROPS can save a considerable amount of your hard-earned savings from ending up with the UK taxman. However, experts believe that the government may be considering anti-tax avoidance rules aimed at those who move overseas, switch to a QROPS, draw down the cash at minimal tax rates and return to live in the UK at a later date.
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