QROPS and Fixed Protection: Protecting pension assets over GBP 1.25 million

QROPS and Fixed Protection: Protecting pension assets over GBP 1.25 millionIf you own UK pension fund assets totalling over GBP 1.25 million, you currently have two months in which to protect your assets from the UK’s Lifetime Allowance (LTA).

The LTA is the upper limit on any tax relief you can receive on your pension fund. Currently set at GBP 1.5 million, from the 6th of April 2014 this upper is being reduced to GBP 1.25 million.

As the LTA dictates the cut off point for tax relief, any value over that amount becomes subject to a tax charge of 25%.

This is the second time the LTA has been reduced in as many years – prompting many individuals with larger pension pots to seek protection for their assets.

If you believe the LTA may affect your fund, there are two main options to protect your pension.

Fixed Protection

The first way to protect your assets is called Fixed Protection. If you do not already have Fixed Protection for the 2012/2013 tax year in place, and successfully apply for Fixed Protection 2013/2014 before the 5th of April 2014, you will not pay excess tax on a fund totalling from GBP 1.25 million to GBP 1.5 million.

However, it comes with the condition that you can no longer make contributions to and therefore continue to grow your fund – which is potentially not the position you wish to be in.


The second option for individuals either living abroad or planning to move abroad is a HMRC-recognised overseas pension.

Named Qualifying Recognised Overseas Pension Schemes (QROPS), until April you can transfer your pension fund without a tax charge – as long as it is below the LTA of GBP 1.5 million.

After you have transferred, you will not only be free to continue contributing to your fund, but benefit from the flexibility that most QROPS offer.

This includes the ability to take up to 30% of your fund as a tax-free lump sum (limited to 25% in the UK), invest in a much wider range of asset classes, and protect your fund from the UK’s capital gains tax and inheritance taxes.

The need for speed

From April 2014, any individual transferring a fund in excess of GBP 1.25 million will face a 25% tax charge on the excess – rather than in excess of GBP 1.5 million as happens now.

The timescale for a QROPS transfer is approximately four to six weeks for the completion of all the necessary forms.

This means time is of the essence if you hold a GBP 1.25 million to GBP 1.5 million pension fund and wish to utilise the QROPS legislation.

The small window of opportunity

To learn more about QROPS legislation and whether it is the right option for you, you should contact an experienced and regulated independent financial advisor.

They will be able to outline which option is the best for your unique circumstances, and guide you through the entire process.

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