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Your comprehensive guide to QNUPS for expats

If you’re an expat, or hoping to soon become one, there can be a lot of things that you have to think about. You have to consider issues like buying a house, adapting to a different culture, and learning a new language.

While these things can all be relatively straightforward, there’s one issue that’s not so easy to solve – how will you manage your existing pension fund?

Over the course of your life, you’ve probably built up a significant amount of wealth but moving to another country can sometimes complicate that. Thankfully, there is a way to get around this problem.

If you’re concerned about managing the wealth in your UK pension funds after you move abroad, a QNUPS could be right for you. Read on to find out what they are and how they can benefit you in our guide to QNUPS for expats.

What does QNUPS stand for?

Finance can be full of jargon so one of the first questions you’re probably asking yourself is what this acronym stands for.

A QNUPS is a Qualifying Non-UK Pension Scheme and you can use them to plan your retirement in a tax-efficient way.

What really is a QNUPS?

To put it simply, a QNUPS isn’t really a pension but more of a set of rules that you need to follow in order to put the wealth in the fund beyond the reach of the UK taxman. By following these rules, you can avoid a significant amount of Inheritance Tax that may otherwise eat into your wealth.

You’d be forgiven if you don’t know much about them because even though they’ve been available for several years, they are rarely talked about outside of international financial advice companies.

The main benefit of a QNUPS is that it isn’t liable for Inheritance Tax unless the government can prove deliberate tax avoidance.

How does a QNUPS work?

In order to avoid any tax penalties, there are a few main rules that they need to abide by. Besides meeting UK QNUPS rules, the pensions must comply with the financial regulations in the country in which they are based.

For example, if you’re living in Spain, it’s important that they meet the legal criteria of the Spanish financial authorities. Furthermore, the schemes must be based overseas and cannot be in countries that have signed Double Taxation Agreements with the UK.

The ins and outs of how they work can be a bit complicated, but essentially it involves appointing a QNUPS provider as a trustee. It also involves basing its structure around HMRC and local regulator rules. Some of the main points that the rules must cover are:

  • The trustees must be outside of the UK, or the pension cannot be classified as a QNUPS. This means that no UK-based pension providers are allowed to offer one.
  • Trustees hold the funds for pension savers and invest them on their behalf.
  • The trustees are responsible for the day-to-day running and management of the QNUPS.

What’s the difference between a QROPS and QNUPS?

If you’ve read my previous article about Qualifying Recognised Overseas Pension Schemes (QROPS), you may be wondering what the difference between the two is.

In essence, the two are very similar but a QNUPS can have several advantages over other offshore pensions for expats. For a start, the former has no obligation to report details of the member’s fund to the UK government.

Furthermore, QNUPS can also have significant tax advantages which can be valuable for growing your wealth.

If you aren’t sure which type of pension scheme you would benefit from the most, you may want to seek professional advice so that you can make an informed decision.

Need expat mortgage advice?

For FREE, no obligation expat mortgage and financial advice, contact me, Dan Ward to see if I can help.

What assets can be transferred to a QNUPS?

A QNUPS is usually funded by either cash contributions or by transferring existing assets into it. Typically, you can transfer most assets, other than UK pensions that have received tax relief, into them.

This includes things like:

  • Cash deposits
  • Equities
  • Investment funds
  • Corporate and government bonds
  • Property
  • Commodities
  • Alternative investments (such as fine art and wine)

Is there a limit to how much I can invest in a QNUPS?

If you’re considering opening a QNUPS, you may be pleased to hear that there’s no limit on the amount you can contribute to one.

That being said, your contributions should be in line with accepted retirement planning practice and shouldn’t be excessive relative to your wealth and earnings.

Who is eligible for a QNUPS?

One of the main benefits of QNUPS is that, subject to the discretion of the pension trustees, there are no eligibility restrictions for who can open one.

With the UK Inheritance Tax exemption, a QNUPS is likely to be attractive to UK domiciled individuals or people who hold UK property to invest in a pension scheme.

Alternatively, it may be useful if you’re internationally mobile, moving countries regularly, and want a tax-efficient retirement plan in a safe and stable location.

Furthermore, a QNUPS can also be a potentially attractive planning option for a non-UK resident or non-UK domiciled individuals who want to move to the UK. For example, you may want to open one if you’re an expat who may want to return to the UK in the future.

Finally, there is also no maximum age limit to start a QNUPS. Typically, most UK pensions have an age cap of 75 years old.

What are the benefits of a QNUPS?

When growing wealth for retirement, things like Capital Gains Tax and Income Tax can eat into your capital growth. Furthermore, you may want to leave a portion of your wealth to your loved ones when you pass away, but doing so can leave them with a hefty Inheritance Tax bill.

This is why a QNUPS can be so attractive, as it is a tax-effective way to save for your retirement and protect your money from any local wealth taxes on death.

Here are some of the main advantages of using one:

Fewer restrictions on contributions

One of the main benefits of a QNUPS is that, unlike most UK pensions, your contributions don’t need to come from your earned income.

There is no fund cap

Another benefit is that there is typically no limit on the size of your fund, within reason. Furthermore, there is also not typically a minimum starting amount.

You may be able to contribute to it after retirement

While not all providers offer this benefit, you may be able to continue to contribute to your QNUPS after you’ve retired. This can be useful if you plan to take a phased approach to retirement.

You can still move freely

QNUPS are anchored to the country in which the provider is based. This means you can move freely between countries without having to cash in your savings.

You can avoid Inheritance Tax liabilities

Generally, a UK pension will fall outside the value of your estate. However, there may be circumstances where IHT can be applied to your pension, such as if it is an older-style pension.

Meanwhile, using a QNUPS means you can rest easy knowing that any unspent money can pass on to your loved ones in a tax-efficient way when you die.

How do I start a QNUPS?

A QNUPS can have a variety of uses so if you think you may benefit from one, you may be wondering how you can start one.

If you are, there are a few important steps:

Seek professional financial advice

Setting up a QNUPS can be an important change for your pension management and so if you want to ensure that you’re making a properly informed decision, you should speak to an expert.

Working with an advisor can help you in a variety of ways, such as by helping you to understand the nuances of local and cross-border taxes.

Find a QNUPS provider which meets your needs

Once you’re able to make an informed decision, you should find a QNUPS provider who can help you. You may want to shop around to find the right provider for your needs.

Paying into it

Once you’ve found a good provider, the final step is paying into it. You can hold a variety of assets in your QNUPS but you may want to be conscious of how you deposit into it.

For example, moving UK pension funds offshore can be costly. This is because HMRC treats the moving of UK pension rights as an unauthorised withdrawal. This means that they may hit you with a penalty of 55% of the value of the transfer.

However, you can move other offshore pension funds that haven’t benefitted from UK tax relief into a QROPS without triggering tax implications. Please bear in mind that some countries may impose a tax on this transfer.

How can working with an advisor help me?

Navigating UK and international tax laws can sometimes feel like trying to find your way across a minefield – making even a small mistake with your overseas pension scheme can have major consequences.

That’s why, if you’re considering starting a QNUPS, you may benefit from seeking financial advice. Working with a financial advisor like me can help you to make a properly informed decision, helping you to avoid any unnecessary taxes and charges.

Knowing that you’re making the right decision can give you a greater feeling of confidence, allowing you to enjoy your retirement in peace.

Need expat mortgage advice?

For FREE, no obligation expat mortgage and financial advice, contact me, Dan Ward to see if I can help.

Please note:

This article is for informational purposes only and does not constitute financial advice. All contents are based on my understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

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