QROPS: Where can I move my UK pension to avoid UK tax? Guernsey vs. Isle of Man

Should you move your pension to the Isle of Man or Guernsey? You need to find a QROPS specialist to answer the question effectively. There have been some recent regulatory changes in the Isle of Man which will make the Isle of Man more competitive in attracting QROPS pension transfers.

The Isle of Man parliament, Tynwald, recently made adjustments to the tax treatment of pension schemes and the Income Tax (Pensions) (Temporary Taxes) Order 2010 came into force on 22 October. Section 50B and is effective for international corporate and personal pension plans, available to non-residents of the Island.

50C schemes are open to residents and non-residents. QROPS under the 50c scheme means that it creates a new type of TEE pension scheme:

• There is no tax deduction for contributions (T)
• Tax exemption (E) on the return on investment in the scheme, and
• Tax exemption (E), ie no tax deduction, on authorized benefits paid under the rules of the scheme, and this applies equally to benefits paid such as pensions, lump sums and death benefits.

So the QROPS schemes carried over to these tax rules in the Isle of Man mean that a pension will be paid gross without deduction of tax. A lump sum of 30% can be taken up front, zero inheritance tax will be imposed, so the full pension will be transferred to your partner or children and you will have the flexibility to determine the nature of your withdrawal.

Even better than that, the new rules only stipulate that the member use 70% of their pension fund to provide a pension. So if someone has a £200,000 pot, only £140,000 should be used to provide a pension income. So if you have an initial fund of £200,000 which you invest in low-risk funds that grow at 5% per year for 20 years, that will give you a pension fund of £530,000. But, only £140,000 is needed as a pension, which means the member has £390,000 that they can take as a lump sum.

Therefore, 100% of the investment return + 30% of the original can be taken as a lump sum, which provides a great incentive to enter this type of QROPS scheme instead of a SIPP (Schedule of pension with own investment) or Guernsey QROPS. However, as always, there are certain caveats. Not all QROPS are the same. You should check the fees and charges for each individual QROPS scheme as they all have different charging structures and if you don’t need greater access to a lump sum you may be better off with a Guernsey scheme with a cheaper charge. structure. The QROPS universe is changing all the time, so you really need to get in touch with an independent financial adviser who is a QROPS specialist.

These Isle of Man QROPS 50C schemes have redefined pension transfer possibilities for people who have worked in the UK. Contact the number above for more information.