QROPS and lifetime allowance
UK pensions legislation imposes a charge of up to 55% when the crystallised value of a person’s UK pension rights exceed the ‘lifetime allowance’, which is currently GBP 1.8m for the UK tax year beginning April 6, 2010.
For those who are affected it is worth remembering that the lifetime allowance charge is potentially chargeable in addition to Inheritance Tax. This provides a compelling reason to consider a QROPS transfer for UK pension rights.
Those whose pension funds are currently below but close to the lifetime allowance should be aware that this limit can be breached, simply through investment growth, with a resulting ‘lifetime allowance’ charge in the future.
This is likely to apply particularly where high value UK pension rights are combined with a strategy of drawing low or no income from the pension fund.
Those with substantial UK pension rights valuations that are below the lifetime allowance can avoid this pension charge completely by transferring to a QROPS as once the funds enter the QROPS they cease to be UK pension rights.
For more information please email us.
QROPS Bureau