UK Government announces changes to be made to the current QROPS rules
As announced in the Autumn Statement 2016, the UK government will bring in new legislation to align the tax treatment of foreign pensions more closely with the UK’s pension tax regime.
Changes will include:
- bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic pensions and lump sums e.g. income from foreign pension schemes will be taxed at 100% rather than 90% that currently applies
- closing specialist pension schemes for those employed abroad (section 615 schemes) to new saving
- extending from 5 to 10 tax years the UK’s taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief
- aligning the tax treatment of funds transferred between registered pension schemes
- updating the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes
The changes are expected to come into force on the 6 April 2017.
The changes mean that overseas pension schemes will be able to offer the same pension flexibility as a UK scheme as long as the scheme is regulated. Before being able to offer the additional flexibility it is likely that local legislation will also need to be updated to reflect the added flexibility.
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