High earners in the UK will soon have limitations on the extent to which they can make fully tax relieved pension contributions. The new UK provisions in this regard are incredibly complex and are being introduced as the highest rate of income tax on earned income rises to fifty percent. However, a UK resident can instead pay into a QNUPS. This will most likely become an attractive option for high earners.
QNUPS will also be a suitable long term home for UK tax relieved funds that have transferred into a QROPS. This is because QNUPS have no investment restrictions and so can for example invest in residential property.
However, it is only non investment regulated QROPS that can transfer to a QNUPS otherwise there will be a fifty five percent unauthorised payment charge. So to migrate funds from an investment regulated QROPS to a QNUPS the process must first involve a transfer from the investment regulated QROPS to a non investment regulated QROPS.
Qualifying Non-UK Pension Schemes (QNUPS are a new UK HM Revenue & Customs (HMRC) statutory instrument that came into force on 15 February 2010 it provides significant opportunity for British expatriates to save on local taxes in the country in which they are tax resident, as well as on UK inheritance tax (IHT). Authorities often rely on pension schemes to incentivise citizens to save for their retirement. These incentives may come in the form of tax efficiencies, relief’s and exemptions. This means that the overall tax rules are generally more favorable than other tax efficient structures. QNUPS are available for both working and retired expatriates and crucially, the scheme solves different problems and offers different opportunities for both sets of people. The problem for most retired expatriates is that they believe that their days of being able to put money into pension schemes are behind them. However,
QNUPS may significantly change many retired expatriates view on this as many working expatriates often aren’t able to contribute into a tax relievable structure. QNUPS can offer some great benefits, especially the extraction of wealth in a tax efficient manner which is usually the most difficult issue to solve.
The key points of a Qualifying Non-UK Pension Schemes:
- There is no maximum age at which you can invest in a QNUPS.
- You do not need to have any earned income from employment in order to make a contribution.
- There is no maximum contribution that can be made into a QNUPS.
The rules are flexible and allow someone who is 85 years of age and has been retired for 20 years to put large investments into a QNUPS and immediately create significant tax advantages. In addition, with a QNUPS you are entitled to take your lump sum as you would with any other pension scheme, however, you may also accumulate your fund by investing regularly into it throughout your retirement. Upon your death the remainder of your fund will be passed on to your beneficiaries free from inheritance tax.