A Qualifying Non-UK Pension Scheme (QNUPS) is an overseas pension that falls within the definition contained in section 271A of the Inheritance Tax Act and the Inheritance Tax (Qualifying Non-UK Pension Schemes) Regulations 2010. The legislation restored inheritance tax protection to certain non-UK pension schemes that are broadly equivalent to UK registered pension schemes. The Regulations had retrospective effective to 6 April 2006.
Being a Qualifying Non-UK Pension Scheme, a QNUPS must broadly satisfy the same conditions as that of a 'Recognised Overseas Pension Scheme'. Importantly, there are no reporting requirements to Her Majesty's Revenue and Customs (HMRC).
No tax relief on contributions. Employer contributions are not advisable.
The regulations state that at least 70% of a member's relevant scheme funds must be used to provide the member with an income for life and the pension benefits are payable no earlier than age 55.
Capital Gains Tax (CGT)
No UK tax on chargeable gains made by the QNUPS.
Inheritance Tax (IHT)
Ordinarily out of scope for UK inheritance tax.
The possible benefits payable under a QNUPS include benefits on retirement (including a lump sum of 30% of the fund and an annuity/pension for life), benefits on incapacity and early retirement, and death benefits.
If the member is non-UK resident, there will be no UK tax charge on any payments to them from the QNUPS. They may, of course, be taxed in the jurisdiction in which they reside. A UK resident would pay tax on the pension income paid from the QNUPS.
The scheme is subject to international rules of the Automatic Exchange of Information.
If the member has not retired, a loan may be granted to them. It is vital that the loan is commercial in all senses and not just in terms of the interest rate which applies. The loan will be an investment by the trustees and therefore all the usual due diligence on the loan and the member's ability to repay, which a prudent trustee would undertake before making an investment, would be carried out.
Guernsey rules currently allow loans of up to 30% of the value of the fund.
QNUPS can be used by individuals as a flexible mechanism for providing retirement benefits, including for UK residents. They are particularly useful as 'top-up' pensions if an individual has not made sufficient provision for their retirement via their registered pension.
It is important that the contributions made to a QNUPS are proportional, both to an individual's overall
wealth and to what is necessary to provide them with appropriate retirement benefits, taking into account any other existing pension rights they have.
Expatriates can use a QNUPS as a tax advantageous home for their long-term savings, creating a safe haven for their wealth now and in the future should they return to the UK.
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