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Pension Reforms 2015 – Compare QROPS

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UK Budget 2015: How do the pension reforms impact each QROP jurisdiction? (Compare QROPS)

Today (6th April 2015) came into force the implementation of a series of UK pension reforms, which impact not only the UK local market but also the international pension market, particularly the field of QROPS.

Harrison Brook outline the key changes and the impacts the reforms have on different jurisdictions and schemes.

Compare QROPS Jurisdictions:

MALTA 
  • Maltese QROPS will no longer allow benefits to be paid from age 50. Minimum retirement age of 55 will apply.
  • New legislation has been enacted in Malta (the Retirement Pensions Act) that will allow Members to receive the same Freedom and Flexibility as most UK Defined Contribution Schemes and SIPPs. However, this will only take effect after existing Schemes are licensed and regulated under this new legislation. This will be later in 2015.
  • PCLS (tax free lump sum) will continue to be available at 30%. This may alter (to 25%) when the new flexible withdrawal rules in Malta are confirmed.
  • No Death Taxes continue to apply.
  • Withdrawals will continue to be available for Members in excess of 55 years of age, at up to 150% of the prevailing GAD rates until the new legislation takes full effect.
GIBRALTAR
  • There will be no changes to most existing Gibraltar schemes.
  • PCLS (tax free lump sum) is still available up to 30%.
  • No Death Taxes continue to apply.
  • Withholding tax of 2.5% on income withdrawals.
  • Withdrawals will continue to be available for Members in excess of 55 years of age, at up to 150% of the prevailing GAD rates.
ISLE OF MAN
  • There will be no change to most Isle of Man Schemes. Due to the Isle of Man being a established pension market for local residents it is unlikely Isle of Man schemes will match the freedom and flexibility of their UK onshore pension counterparts. If you have returned to the UK holding a Isle of Man scheme and wish for the same access benefits, please consult our QROP to SIPP transfer back service. 
  • PCLS (tax free lump sum) will continue to be available at 30%. 
  • No Death Taxes continue to apply for those Members who have not commenced drawdown.
  • Death Tax of 7.5% applies otherwise.
  • Withdrawals will continue to be available for Members in excess of 55 years of age, at up to 150% of the prevailing GAD rates.
  • Withholding tax of 20% will continue to apply to withdrawals where no effective Double Taxation Agreement exists.

Each QROP jurisdiction offers positives and negatives depending on your current situation including your residency. It is important to understand which jurisdiction is best suited to your requirements. If you hold an existing QROP policy or are planning on transferring your existing UK pensions to a QROP, firstly speak to a Harrison Brook adviser who can compare QROPS along side you to determine the best advice.

How does this compare with a UK based SIPP?

The pension reforms have presented a range of new options to take income from a SIPP:

  • Flexible Drawdown: You will be able to take up to 25% of your pension fund tax free and take the remaining pot as and when you want, paying your marginal rate of UK income tax on each pension payment.
  • Uncrystallised Fund Pension Lump Sum (UFPLS): You will be able to take flexible lump sums from all or part of your pension pot that hasn’t already been used for an income via drawdown. This will allow you to take 25% of every flexible lump sum tax free, and you will pay your marginal rate of UK income tax on the remaining part of your flexible lump sum.
Impacts on death benefits:
  • If death occurs before 75: Remaining fund can be paid out tax free to the person(s) nominated by the Member prior to their death.
  • If death occurs after 75: Remaining fund is paid out to the person(s) nominated by the Member prior to their death. The person(s) who inherit this money will pay tax on this.

Questions?

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