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Transfering Pension from UK defined benefit scheem to other QROPS plan - consequences

Transfering Pension from UK defined benefit scheem to other QROPS plan - consequences

Old Jun 29th 2012, 11:40 pm
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Default Transfering Pension from UK defined benefit scheem to other QROPS plan - consequences

I have looked over many QROPS postings and I can not find what I am looking for.

I am resident in USA.

I have a defined benefit pension in the UK that I want to transfer out of that scheme to a plan I can invest myself. The transfer value outweighs the annual defined benefit IMHO.

Since I am not a UK resident I can not move the pension to any UK scheme so I am left with a QROPS scheme somewhere else in Europe? Or is there another option.

I am concerned about the US/IRS treatment of this money if I move it from its current home.

I have heard/read that there are some QROPS plans set up in recent years that have the IRS reporting so that the IRS is happy/knows about it - but will not take it until withdraws are made... Prudential International?

Anyone have experience with this or can advise.

many thanx

tim
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Old Jun 30th 2012, 12:37 am
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

QROPS don't work, don't bother, would be the simple answer.
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Old Jun 30th 2012, 4:25 am
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

If you are a US resident or citizen you are far better off to leave pensions in the UK and take advantage of the tax deferral and double taxation relief on the UK/US tax treaty than doing a QROP that will charge you big fees to wrap your pension in an insurance policy to produce US tax deferral that you already get through the US/UK tax treaty.
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Old Jul 2nd 2012, 2:52 am
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

As I indicated I have a defined benefit scheme and I want to take it out of that scheme - I don;t care where it goes but I don't seem to have many options.

anyone have any suggestions apart form leave it where it is?

thanx
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Old Jul 2nd 2012, 5:10 am
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

Nope

Been there.
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Old Jul 2nd 2012, 11:23 am
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

Originally Posted by sfkayaker View Post
As I indicated I have a defined benefit scheme and I want to take it out of that scheme - I don;t care where it goes but I don't seem to have many options.

anyone have any suggestions apart form leave it where it is?

thanx
The UK/US tax treaty deals with defined benefit pensions quite well as it provides tax deferral and you will only be taxed on withdrawals in the US.
There's a good argument to be made that the QROP transfer will not be seen as a taxable event by the IRS. The QROP will cost you a lot in fees and then I bet the scheme will also impose annual fees and you won't be any better of for tax purposes than if you left the money in the UK. You many also have far more complicated US taxes depending on the QROP structure.

If the UK pension is providing reasonable income and is not total cr*p, I'd leave it alone and use it as a fixed income portion of your portfolio, you can play the market with money you have in US accounts.
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Old Jul 3rd 2012, 9:56 pm
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

Anyone have any comment on this taken from the following link.

http://qropsadviser.net/qrops-malta/
-------
Malta’s Tax Treaty Network

A key advantage that Malta has over it’s QROPS rivals is that it has a comprehensive network of Double Taxation Treaties (DTA’s) (which currently number 57), which can offer scheme members significant advantages. In particular, Malta has a wide ranging tax treaty with the US, which has created the possibility of a US/IRS compliant QROPS for US residents.

If you live in a country which has a double taxation agreement (“DTA”) with Malta, this allows your pension income to be paid out gross, and you then pay the taxes in the country you are resident of, when you start to draw an income from your pension fund. This can have significant advantages if you live in a country which has favourable tax treatment of pension income, such as Spain.

----------
As I said I have a strong desire to move my pension and not get hit by the IRS taxing it on transfer (plus penalties).
The Malta-USA tax treaty is new (2011) and there are QROPS set up in malta (STM Malta) offerting very fee friendly plans.
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Old Jul 4th 2012, 1:36 pm
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

UK Government are conducting a review of qrops last I read, due to the tax implications of people doing this and abuse of the system
google UK government investigate qrops and you'll see some of the stuff
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Old Jul 5th 2012, 10:26 am
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

Hello Tim,

I'm not sure why you say "Since I am not a UK resident I can not move the pension to any UK scheme". Perhaps I am missing some detail but you can move from a UK occupational scheme to any personal UK qualified pension even if you are personally UK non-resident. The trick is to find a pension which understands that the 'client' is actually the pension scheme which is UK resident and not you. Now you could contact us privately and after some formalities for regulatory compliance, we'd probably tell you without charging, but then our professional standards would require us to document your decision to move from the occupational scheme at all, which we would say is almost certainly an awful idea. Unless we're missing something - such as the scheme you're in is about to collapse: or you absolutely have to move out of sterling and invest in another base currency. And as for QROPS - to our mind, they're generally a bad idea because the extra charges can halve the amount of your pension over 20 years, and because most people end up paying more tax on the resultant pension income. For some reason, people think 'tax free lump sum' is always good, but you still have to invest the lump sum for income, and then you pay local tax on the income. But sometimes they're useful. Anyway, feel free to contact us, no charge, and we'll lay out your options.

Rob NW
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Old Jul 5th 2012, 11:55 am
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

Originally Posted by sfkayaker View Post
Anyone have any comment on this taken from the following link.

http://qropsadviser.net/qrops-malta/
-------
Malta’s Tax Treaty Network

A key advantage that Malta has over it’s QROPS rivals is that it has a comprehensive network of Double Taxation Treaties (DTA’s) (which currently number 57), which can offer scheme members significant advantages. In particular, Malta has a wide ranging tax treaty with the US, which has created the possibility of a US/IRS compliant QROPS for US residents.

If you live in a country which has a double taxation agreement (“DTA”) with Malta, this allows your pension income to be paid out gross, and you then pay the taxes in the country you are resident of, when you start to draw an income from your pension fund. This can have significant advantages if you live in a country which has favourable tax treatment of pension income, such as Spain.

----------
As I said I have a strong desire to move my pension and not get hit by the IRS taxing it on transfer (plus penalties).
The Malta-USA tax treaty is new (2011) and there are QROPS set up in malta (STM Malta) offerting very fee friendly plans.
Malta an the UK have very similar tax treaties with the US. However, that does not guarantee any advantageous tax treatment of a Maltese QROP.

First you will have to convince the IRS that the transfer is not a taxable event.

http://expattaxandlaw.com/QROP%20cro...etirement.html

Next you have to see how the QROP is structured and how it will be taxed by the IRS....and of course now Malta. What is the exact structure of the maltese QROP, is it an insurance wrapper or a foreign grantor trust? This now gets you into the complicated area of IRS taxation of foreign private pensions and I would get a US/Maltese tax attorney to help you.

Finally there is the cost, do you have any idea of the upfront and continuing fees?
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Old Jul 5th 2012, 12:07 pm
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

Originally Posted by Independence View Post
Hello Tim,

absolutely have to move out of sterling and invest in another base currency. And as for QROPS - to our mind, they're generally a bad idea because the extra charges can halve the amount of your pension over 20 years, and because most people end up paying more tax on the resultant pension income. For some reason, people think 'tax free lump sum' is always good, but you still have to invest the lump sum for income, and then you pay local tax on the income. But sometimes they're useful. Anyway, feel free to contact us, no charge, and we'll lay out your options.

Rob NW
QROPS fees and costs can be eye watering, so you MUST find out about those.

If you are a US resident, there's no "tax free lump sum", but if you can apply the US/Malta tax treaty there would be no maltese income tax on pension income, just US. Of course that is a big if as it will depend on how the IRS sees the Maltese QROPS.
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Old Jul 13th 2012, 6:13 pm
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Default Re: Transfering Pension from UK defined benefit scheem to other QROPS plan - conseque

many thanks for all the comments and data.....

definitely proceeding carefully with this and I (think) I understand the QROPS issues

tim
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