Qualifying Non-UK Pension Scheme ('QNUPS') - Summary
Qualifying Non-UK Pension Scheme ('QNUPS')
Qualifying Non-UK Pension Schemes (QNUPS) were introduced by the UK government on 15th February 2010 to correct an ambiguity in earlier legislation regarding the UK Inheritance Tax (IHT) treatment of certain overseas pension arrangements.
Qualifying Recognised Overseas Pension Schemes (QROPS) are also considered QNUPS as both have the same qualifying conditions. This in effect means that many of the guidelines governing QNUPS are similar to QROPS. One important difference is that there is no required reporting to the HMRC under QNUPS.
Features of QNUPS
• A UK resident can make contributions to a QNUPS without being constrained by UK standard pension limits.
• Contributions are immediately outside of the estate from day one as per the Inheritance Tax (QNUPS) Regulations 2010.
• Contributions do not form part of his/her lifetime allowance.
• Contributions are not a gift or chargeable lifetime transfer.
• No tax relief on contributions. Employer contributions are not advisable.
• The ability to take up to 30% pension commencement lump sum.
• Only 90% of the income is taxable if UK income tax is due.
• Flexible income can be deferred until 75.
• It is possible to transfer an existing QROPS to a QNUPS under certain circumstances.
• Investment flexibility.
• No lifetime limits on fund size.
Although there are no reporting requirements from the QNUPS to the HMRC, contributions must:
• Have the correct motive and purpose (i.e. pension contributions).
• Be commercial and appropriate.
QNUPS – Client Profiles
A typical client may:
• Have a shortfall of income in retirement and will be of high net worth and/or have enjoyed significant earnings during their lifetimes.
• Want to transfer from a QROPS, where appropriate.
• Be an expatriate who wants to plan for their retirement and will be returning to the UK in the future.
UK Taxation Position
Inheritance Tax (IHT) – As per the Inheritance Tax (QNUPS) Regulations 2010, there is no IHT applicable to Qualifying Non UK Pension Schemes.
Income Tax – No UK income tax on non-UK source income from investments within the QNUPS.
Capital Gains Tax (CGT) – No UK tax on gains made by the pension scheme.
QNUPS can be used as an effective, flexible method for UK residents and expatriates to plan for retirement with reduced exposure to IHT. With QNUPS there is no statutory maximum age for investing and a client is free from a maximum contribution limit. Expatriates can use QNUPS as a tax advantageous arrangement to protect and enhance their long term income in retirement.
Please see the attached PDF for a downloadable version of this document and read in conjunction with our QNUPS case study: http://www.qropsbureau.com/news-and-events/qnups-news/qnups-case-study-mr-jones/