A Qualifying Non-UK Pension Scheme (QNUPS) is a type of overseas pension scheme available to British expats who permanently reside outside of the UK. The scheme was introduced by HMRC as part of the Inheritance Tax Regulations 2010, and has now become an attractive way to ‘top-up’ a retirement savings plan.
Our QNUPS guide below outlines the key advantages and disadvantages of the scheme:
ADVANTAGES OF QNUPS
- FUNDING: QNUPS carry no contributions limits and can be funded by contribution, transfer from an international pension or QROPS. There’s no requirement to have any employment (relevant) income in order to make contributions.
- GROWTH: QNUPS benefit from the absence of a capital gains tax, no lifetime limits on fund size, no UK income tax on non-UK source income from investments, no investment restrictions, and multiple currency options.
- BENEFITS: QNUPS may avoid local succession laws thus enabling control over who can inherit. QNUPS are exempt from reporting requirements to HMRC, there is no requirement to purchase an annuity and offer more flexible permitted investments. The scheme also enables the client to take a lump sum of up to 30%, and if UK income tax is due only 90% of the income is taxable.
DISADVANTAGES OF QNUPS
The advantages of the QNUPS far outweigh the disadvantages; however it is worth pointing out the following:
- There is no tax relief on the contributions made to the QNUPS
- Employer contributions are not advisable in this scheme
Who can benefit from a QNUPS?
A Qualifying Non-UK Pension Scheme can benefit a variety of people, particularly those that fall in with the following criteria:
- Expatriates who are saving for their retirement but may wish to return to the UK in the future
- Individuals wishing to transfer from an International Pension Plan (IPP)
- UK residents or domiciled individuals with a high net worth, who have already made use of their maximum income tax relievable pension contributions
- Individuals who have become restricted to basic rate income tax relief on UK pension contributions since April 6th 2010.
How is the QNUPS taxed?
The QNUPS is subject to the following types of taxation:
- INCOME TAX: Outside the scope of UK income tax, unless UK source income is received
- CAPITAL GAINS TAX (CGT): No UK tax on chargeable gains made by the QNUPS
- INHERITANCE TAX (IHT): UK Inheritance tax would not normally be charged