Pension in payment into QROPS ?

Can a pension plan which is in Income drawdown (after the 25% lump sum has been taken) be transferred to a QROPS overseas?

I presume the above cannot be done for a pension from which an annuity is being paid.

Hi,

I have detailed below a response I have found from HMRC on this issue which I believe answers your questions, together with the original question posed to the Revenue. Although the original question is about Australia it is applicable to all transfers to QROPS where either based.

I have commented afterwards on some issues you may wish to consider.

Transfer of benefits in payment

Q. Will it be possible to transfer a UK pension to Australia, where benefits are either providing unsecured Pension benefits or alternatively secured pension benefits (i.e. UK pension is in draw down). We note that UK pension annuity transfers would not be authorised outside EEA.

A. Yes, this would be a recognised transfer under section 169. But once the unsecured pension (UP) fund or alternatively secured pension (ASP) fund is transferred it will need to stay within the authorised payment rules. So they will need to stay within the FA 2004 maximum withdrawal limits and basis periods for USP/ASP funds. The regulations (SI 0499 of 2006) dealing with treatment of transfers of pensions in payment, including transfers of UP/ASP funds will also apply. The sums and assets transferred are treated as remaining under the same arrangement for UK tax purposes.

Where an individual is in receipt of an annuity, pension rule 4 in s165, paragraph 3(1) of schedule 28 and s275 mean that the annuity can only be transferred to an EEA insurance company. SI0499 of 2006 also covers transfers of lifetime annuities. Where a lifetime annuity is payable following the transfer it is treated as the same lifetime annuity for tax purposes.

Depending upon your circumstances, a QROPS may be appropriate to receive a pension share but as you can see the UK rules will not disappear.

My experience of overseas transfers is that they are fraught with danger / potential pitfalls. They can be very expensive. Given that the flexibility of an overseas pension scheme might be hampered by the overhang of UK rules, you may well be better to remain within a UK scheme. The penalties for the scheme becoming unauthorised are severe.

Of course, the decision to remain in a UK scheme will depend upon your tax circumstances, whether any double taxation agreements are in place and how feasible administration will be.

There is a lot to consider. If you would like any further guidance, please feel free to post again.

Regards

Phil

Please note: Although I am a Resolution Accredited Independent Financial Adviser my comments are given here as general guidance ­­­­­­­­­­­­­­base­­­­­­­­­­­­­­d on the (often limited) information available and does not constitute financial advice. They should not be seen as a substitute for detailed financial and legal advice.