Following the introduction of the 'Overseas Transfer Charge' (OTC) by the UK Chancellor in 2017, there are 3 primary reasons to remain supportive of QROPS:
- Members with a Scheme valued in excess of £1m and looking to capitalise on Lifetime Allowance (LTA) planning opportunities;
- Access to 100% of the Scheme value as death benefits when a Member satisfies Non-UK residency of +10 tax years at date of death, irrespective of age;
- Clients who wish to remove all personal / wealth assets out of the UK for personal / emotional reasons.
By comparison, with the extension in 2017 of the UK Member Payment provisions from 5 to 10 years, for a Non-UK resident, a SIPP can be more advantageous for a number of reasons, especially where the Member intends to return to the UK to draw retirement benefits:
Lower core fees;
- LTA not referenced at transfer as BCE8 only refers to QROPS transfers from a UK registered pension scheme;
- If a transfer is received from a UK registered scheme it is not an overseas transfer and therefore can transfer with no OTC consequences for non-EEA based clients;
- Quicker transfers via Origo Transfer System for Defined Contribution transfers and generally an easier process than for DB transfers;
- SIPP schemes are covered by the FSCS and FCA regulations which gives added comfort;
- FCA 'standard assets regime' means that most funds & DFM's currently being used by international advisers can still be used in a SIPP portfolio;
- 25% PCLS available via a SIPP can be the same as a QROPS e.g. within 5 years of transfer or where the QROPS Member has not been non-UK for 10+ years at that date;
- Flexibility to take PCLS entitlement over a longer period than the 12 month limit in a Malta QROPS;
- Wider UK Double Taxation Treaties (DTT) (compared to Malta) means that via an ‘NT’ PAYE tax code a Member can receive gross income in retirement and pay tax locally where a valid UK DTT exists with the country of residency;
- Even where no DTT exists, the £11,500 UK personal allowance can still be claimed;
- Easy to consolidate legacy or old style schemes that only pay income by way of annuity, into the SIPP, for access to a flexible benefits regime, including UPFLS that is not available via QROPS;
- 100% death benefits available in the SIPP where death of a Member occurs before age 75 (if a Member dies after age 75 the income tax liability for a nominated beneficiary might be offset where a valid DTT exists).