Which QROPS Jursidiction?
With Malta, Gibraltar and the Isle of Man being among the most popular QROPS locations, choosing the right one is essential and should be largely based on where pension income will be taken. Below is a guide to each location to be used in conjunction with personalised financial advice.
Malta
Malta has a well regulated financial services sector. Pensions are regulated by the Malta Financial Services Authority (MFSA) and as a member of the EU, its legal structure is similar to the UK providing a stable destination for pension assets. Maltese pensions are recognised by Her Majesty's Revenue and Customs (HMRC) and has become the major consideration for QROPS transfers.
Malta has over 70 double taxation agreements (DTA) with taxing rights often granted in your country of residence. Maltese QROPS allow flexi-access drawdown (FAD) so income is paid gross and free of Maltese tax. Without a DTA however, withholding taxes of up to 35% may apply.
On death, funds are paid out without deduction of Maltese Tax but taxation of death benefits depends on the beneficiaries' country of residence, in addition to the duration the deceased had been non-UK resident at the time of death.
Gibraltar
Gibraltar is a well-governed UK territory and a member of the EU providing comfort for investors. Solid regulatory and legal frameworks makes an attractive destination for QROPS with HMRC recognising pensions as a result. Pensions are taxed differently in Gibraltar and is often used for countries without DTA's. Instead, tax information exchange agreements are in place to avoid double taxation.
Pension commencement lump sums (PCLS) of up to 30% are possible at age 55. Thereafter, income is based upon UK Government Actuary Department (GAD) rates which are used to calculate annual income when in 'capped drawdown', and are reviewed monthly with movements in UK gilt yields.
Gibraltar taxes pensions 2.5% at source, making it useful for countries without DTAs in place. Tax may still be due locally so always seek advice. Death benefits are paid to beneficiaries as a lump sum without tax, income will be taxed at 2.5%.
Isle of Man
The Isle of Man is a well known investment centre and one of the first jurisdictions to offer QROPS and QNUPS (qualifying non-UK pension schemes). Overseas investors have benefitted from tax-efficient investing there for decades and robust regulation makes it ideal for expatriate investment.
Benefits start at age 55 between 0% to 150% of UK GAD rates. With an effective DTA, income is taxed in the member's country of residence but without one, 20% withholding tax is deducted.
On death, the fund can be transferred to another scheme and provide income for dependants, or paid as a lump sum. If lump sum is paid after drawdown has begun, tax of 7.5% is due. If the member was UK resident during five previous tax years and dies after 75, beneficiaries may have a UK tax liability.
Pension transfers can be life-changing so to get it right first time, speak to an advisor with your best interests at heart and contact us today.