QROPS transfers set to soar as 50% tax deadline nears

QROPS pension transfers are expected to soar in the run –up to the new financial as wealthy taxpayers look to shift their homes and assets offshore to avoid losing half their income in tax.

From April 6, anyone earning over £150,000 faces a 50% super tax on income plus capped UK pension contributions.

The government has already ruled that any UK pension-bound income should face higher tax charges to try and stop top rate taxpayers putting aside cash at lower tax rates before the start of the financial year.

About 10 potential super taxpayers were leaving the country each week at the end of 2009, according to The Times, and this number is expected to rise following the clamp down on bank bonuses.

For top rate taxpayers staying in the UK, the options to reduce tax involve deferring liabilities by putting cash in to assets that attract capital gains tax, which is paid at 18% across the board by everyone rather than 40% or 50% like the higher rates of income tax.

For those moving overseas permanently, either as an expat or international workers who have accrued UK pension rights, then transferring pension funds in to a QROPS has many tax benefits.

“Many clients have not made the best of end of year tax planning in the past because they didn’t see the point,” says QROPS.net experts, “This year is different because the 50% tax is eating up half of what someone earns and clients really want to know what they can do to minimise the effect on their families and lifestyle.

“50% tax on an income of £150,000 immediately reduces it to £75,000 without the effect of other taxes and national insurance. That’s a lot of money to lose when you have worked hard to get where you are.”

Although a QROPS has many rules subject to HM Revenue and Customs, the offshore pension scheme has no lifetime allowance (LTA) like a UK pension and the both the fund and any drawn down benefits are outside the scope of UK tax. Instead they are taxed in the country where the QROPS is based and where the pension holder lives. So marrying up the best jurisdiction for the country of resident for a QROPS member is extremely important.

QROPS investment options are also more flexible than UK pensions, with far more options to put money in more currencies, bonds, stocks and shares, commodities and other assets.