UK Pensions Reform a spur to QROPS
Chris Williams, Senior Investment Adviser with Meyado Private Wealth Management Pte Ltd in Singapore explores the changes being made to UK pensions and the benefits of QROPS.
- (1888PressRelease) September 19, 2010 - HM Treasury's consultation on the removal of the requirement to annuitise by age 75 has now ended. Based on its findings, the Government will now draft legislation for introduction to law by April, 2011.
By removing the annuity requirement, the new rules should allow more flexibility for individual pension planning. One major drawback, however, is that the residual funds remaining after an individual's death will be subject to a Tax Recovery Charge, likely to be 55%. This is in addition to income tax payable on withdrawals and inheritance tax on funds withdrawn which still form part of the deceased's estate. If no pension drawdowns have started at the time of the individual's death, then lump sum death benefits will continue to be paid tax free prior to the pension holder reaching age 75.
For high net worth individuals who can show that they have sufficient income (the Minimum Income Requirement, which is prevent people from exhausting their pension prematurely), there will be a flexible drawdown arrangement whereby they can access lump sums in excess of the capped drawdown limit. These "excess" drawdowns will be subject to the tax recovery charge.
The Government has also ruled out the possibility of allowing the remaining pension fund to be passed to the deceased's family.
So what does this mean for you?
Well, if you plan to remain outside the UK after retirement, or you're not sure when or if you might go back there, then you should consider transferring your pension offshore. If done properly, this will give you a lot more flexibility and control over where your pension is invested. In addition, it can remove some or all of the inheritance tax liabilities you would face in the UK.
Transferring your pension offshore through a Qualifying Recognised Offshore Pension Scheme (QROPS) does not mean you get instant access to the whole pot! It does mean that you can feel comfortable that all the money will pass to your family after your death.
For more information and an analytical review of your situation please contact Meyado Singapore.
Meyado Private Wealth Management Pte Ltd
32 Pekin Street, #03-01, Singapore 048762.
Tel: 6538 3583 or email chriswilliams ( @ ) meyado dot com
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