Why Move Your UK Pension to a QROPS in Gibraltar?
Once you have decided to move your UK pension to a QROPS scheme in another country to take advantage of the many benefits – especially the tax benefits – the next question remains: to which country?
At Carrick Wealth we believe one of the best options is Gibraltar, and we have advised many of our clients accordingly. Bear in mind that you do not necessarily have to live in Gibraltar if your pension is placed into a QROPS there. QROPS is an acronym for Qualifying Recognised Overseas Pension Schemes, a legal vehicle allowing UK pensioners to take their pension fund out of the United Kingdom. For more information on QROPS, click on this link.
Of course, there are many other countries that also allow you to benefit from QROPS, but, for those living in South Africa, the jurisdiction of Gibraltar stands out.
“One of the benefits of Gibraltar as a jurisdiction to our clients in South Africa is the low 2.5 per cent tax on pension income there,” says Michael Potts, Group Sales Director at Carrick Wealth.
QROPS Offer Many Advantages
If you have a UK pension and do not plan on retiring in the UK, QROPS offers you many advantages and a vast range of choices, as there are thousands of retirement pension plans available in more than 40 countries around the world meeting the criteria set down by HM Revenue and Customs (HMRC), the British tax authority.
This is still the case, even after HMRC changed the rules in April 2015 to try to make it more attractive for those holding UK pensions to keep your pension in the UK. While we will encourage you to do your own research, you will need expert financial advice from a licensed and reputable independent financial adviser (IFA) who can facilitate the transfer of your pension funds into a QROPS. For more information on QROPS and the new rules, go here and here.
Our advisers will assist you not only in transferring your pension to one of the more favourable QROPS schemes in a beneficial jurisdiction such as Gibraltar, but will also help you protect your wealth from the many threats eating away your pension – from ‘pension raiding’ by governments, misunderstanding tax and pension rules in different jurisdictions, unscrupulous and unregulated financial advisers to the payment of excessive or hidden fees.
If you have at least £30,000 in UK pension benefits, you can transfer these funds to pension trustees in Gibraltar. Once your UK pension fund has been transferred to a QROPS, the money can be invested in quality investments.
Why Carrick Chooses Gibraltar for QROPS Investment
Gibraltar has been offering QROPS since September 2012 following lengthy consultations between the Gibraltar Association of Pension Fund Administrators (GAPFA), the government of Gibraltar and the HMRC. With Gibraltar constantly striving to maintain its position as a “QROPS jurisdiction of choice” it tries to keep its own legislation aligned with that of the UK in order to maintain QROPS benefits for both residents and non-residents.
This allows both UK expats and foreign workers with UK pensions to shift their pensions into Gibraltar QROPS schemes, regardless of where they live outside the UK, and still enjoy a low 2.5 per cent tax on their pensions.
If your pension remains in the UK, any lump sum death payments paid to your beneficiaries if you die after the age of 75 – or, if you (the pension owner) have begun to draw pension income – will be taxed at the beneficiaries’ marginal rate. In addition, if the pension lump sum is paid after 75 years of age, it will be subjected to 40% IHT. In Gibraltar, on the other hand, there is no taxation on lump sums.
QROPS trustees have an obligation to report to HMRC for a period of 10 years following the date of transfer of the UK pension scheme. The scheme must follow UK rules for the first five years of non-residency of the member, failing which there could be an unauthorised payment charge of 55 per cent. After the five years the scheme can follow the local rules, providing they are similar to the UK rules.
Following the introduction of the new rules in April 2015, there is actually very little additional flexibility before the five years and after the five years, with the only real change being that a 30 per cent lump sum can be taken as opposed to a 25 per cent lump sum. In Gibraltar, the QROPS rules are far more flexible.
The ability of a jurisdiction to adapt to changes in UK legislation is, of course, always a matter of concern. After the announcement of legislative amendments to HMRC’s rules for QROPS with effect from April 2015, the Gibraltar authorities engaged in discussions with their UK counterparts with a view to adapting Gibraltar’s legislation and aligning it with the new UK rules.
But the Gibraltar government said, while it had considered HMRC’s new rules, it would wait for the conclusion of consultations before making any changes to its own rules because Gibraltar wanted to maintain its position as “a jurisdiction of choice for QROPS”. Issues that may be affected are lump sum withdrawals and the requirement of an income for life.
These issues are extremely complex, however, so it is preferable to consult an IFA or a tax planner about your best options. A qualified, experienced adviser can assess your liabilities and obligations, discuss the best option for your particular needs, and, if preferable, an IFA can manage the QROPS transfer for you.
Gibraltar is a Superior Financial Centre
Gibraltar Bay
Apart from the fact that Gibraltar fully meets all HMRC requirements for a QROPS, it is also a UK crown dependency and its people are also British citizens. The local tender is the Gibraltar pound which circulates freely on par with the British sterling pound. These factors provide a sense of stability, security and familiarity that will be most reassuring to those with UK pensions. English is the official language – another point of convenience for UK pension-holders.
Gibraltar is fully self-governing in all areas except defence and foreign policy which fall under the UK government. Gibraltarians elect their own representatives to the territory’s House of Assembly, while the British monarch appoints a governor. Gibraltar is also a member of the European Union (EU) and forms part of the Single European Market for services, including financial services, bringing with it many advantages.
Because Gibraltar is a European territory for whose external relations Britain is responsible, it falls fully within the EU. But the 1971 UK Accession Treaty relieves Gibraltar from the common customs tariff and various other taxes.
Gibraltar has not entered into any Double Tax Treaties with any countries. There are no exchange controls and there are no restrictions on foreign investment.
Gibraltar’s approach to business and financial matters has ensured a favourable tax regime, highly competitive operating costs and a competent and highly trained workforce. The territory has a world-class, highly regulated and sophisticated financial services sector which is overseen by the Financial Services Commission (FSC).
Pensioners have increased control over where their pension funds are invested owing to the flexibility in investment opportunities on the Rock. It is a destination of choice for individuals with substantial assets, income or wealth, and many choose to establish their tax residence in Gibraltar where they can benefit from the more advantageous rules relating to their tax and estate planning, thus limiting their tax liability. There is no capital gains tax, wealth tax or inheritance tax payable in Gibraltar
Furthermore, there are no restrictions on the repatriation of capital, royalties, earnings or interest. Repatriation of these can be done in any currency. There are also no restrictions on the importation of capital to Gibraltar. Residents and non-residents may operate bank accounts in any currency and trusts created by a non-resident of Gibraltar for non-resident beneficiaries are exempt from all taxes and need not be registered. There is also no requirement for a minimum number of days of residence in Gibraltar.
In 2008, Jane’s Country Risk named Gibraltar as the fifth most prosperous state globally measured according to political stability, its economy and security.
Contact us for advice: If you’d like to find out more about transferring your UK pension into a QROPS in Gibraltar, or anywhere else, contact an expert at Carrick Wealth today.
Carrick Wealth is a licensed South African financial management company specialising in retirement and pension planning, fiduciary and estate planning, investments, and QROPS.
The company has offices in Cape Town, Johannesburg, Durban, Zimbabwe and Mauritius.
For more information call +27 21 201 1000
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