QROPS Advice: Beware Global Grasp of IHT

Beware global grasp of IHT

IHT is assessed on the worldwide assets of people domiciled in the UK, including foreign countries where there are no or low death duties. You could be resident overseas but still deemed to be domiciled in the UK and liable to pay IHT, if HMRC can establish that Britain was the country which you still regarded as home at the time of your death.

For this reason, specialist advisers will often recommend that you consider selling your UK home and other British property when transferring to a QROPS. However, it will also be important to consider ways of preserving the real value or purchasing power of your pension overseas – before and after you draw benefits from your retirement fund - and these are the subjects of the next chapter.

Many countries overseas impose lower taxes on pensions than the United Kingdom and allow pensioners more choice about how they spend their savings. Quicker and cheaper international travel also makes it easier to consider retiring abroad while retaining the ability to return to the UK if you wish to do so.

QROPS enable pension savers who have left or intend to leave the UK and become non-resident in the UK for tax purposes, to enjoy the best of both worlds. They can take their retirement savings with them to a lower-tax jurisdiction and obtain greater freedom about how they spend or invest their savings than would be the case in the UK.

For example, after transferring to QROPS a pensioner who has been non-resident in the UK for at least five full tax years, could use their pension fund to buy residential property as an asset for their QROPS – and, it is worth pointing out, residential property is a form of asset which cannot usually be held within British pensions. You do not have to buy an annuity, you can have your fund in sterling or any currency and avoid up to 82 per cent tax against the fund imposed in the UK. The entire fund can be left tax-free to benefit your heirs.

By Ian Cowie
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/7188890/QROPS-and-pensions-before-you-go.html