Wednesday, 9 June 2010


Qualifying Non-UK Pension Schemes - QNUPS
QNUPS were introduced on the 15th February 2010 and came about through amendments detailed in Statutory Instrument 2010/51 relating to the UK Inheritance Tax Act regulations. Before changes were made to the pension tax rules in 2006, protection from UK Inheritance Tax (IHT) applied to certain non-UK pension schemes. When the changes were introduced this exemption was unintentionally omitted which resulted in certain overseas pension schemes losing their IHT exemption. With these amendments both QNUPS & Qualifying Recognised Overseas Pension Schemes (QROPS) now enjoy exemption from
The Plan is a tax efficient wrapper for pension assets, all funds within the Plan are free from IHT, there are no tax charges on death and the fund will enjoy tax free roll up. Contributions will be made by the member from taxed income or from personal capital, there is no tax relief on payments into the Plan. Contributions can either be single or regular (subject to minimum limits). There are no limits on the amount that can be contributed to the Plan but any transfers into the Plan must be justifiable in line with the client's overall wealth position. QNUPS are not a deathbed planning tool.
Investment choice within the Plan has very few restrictions. Permissible investments include; equities, bonds, gilts, insurance products, bullion, private & public listed company shares, commercial property and previously excluded investments known as Taxable Property; Taxable Property covers investments such as residential property, antiques, fine wine and collectables. Whilst there are virtually no restrictions on allowable investments it is important to remember that the scheme is a pension plan and a low risk strategy must be pursued.
It is possible for the member to borrow up to 25% of the Plan funds, this must be arranged at a commercial rate of interest (which will be paid to the the Plan) and must be repaid before drawdown can commence. It is also a requirement that security must be held against the loan.
Income will be paid gross from Guernsey and subject to the client's marginal rate of tax in their country of residence. It is important that each client receives tax advice in their country of residence to ascertain the tax position there. A lump sum of up to 25% of the fund can be paid to the member (tax free for UK resident members, clients in other jurisdictions will need to seek advice).
Standard retirement benefits and termination events as follows:
■ Normal Retirement Age of 65;
■ Early Retirement Age of 55;
■ Death & Permanent Disability;
However there may be greater flexibility, determined by an individual's circumstances, which will need to be considered on a case by case basis. The member must start to draw an income by the age of 75.
■ A cash lump sum benefit up to 25% of the Plan value, tax free when paid into the UK;
■ A number of flexible benefit income options to be agreed with the client such as fixed term payments and variable income options.
Upon death of the member, all remaining funds within the scheme will be free of IHT. The funds can then be used to pay a dependants pension, be held in trust for future beneficiaries or be paid as a lump sum. Again, it is vital that the member seeks appropriate taxation advice relevant to both themselves and their potential beneficiaries before registering their wishes for disbursement with the trustee. The trustee retains ultimate discretion on any distribution but the member's wishes will be carefully considered before any decision is made.
The Plan is a pension plan that will appeal to high net worth UK residents seeking an alternative to a traditional pension.
Potential clients may have maximised their UK registered pensions and are looking for alternative options or they may be restricted with the new anti-forestalling rules in the UK and are looking for greater flexibility in their retirement plan. It also provides clients with the peace of mind that all funds can be passed upon death to the member's beneficiaries free from IHT and any withholding taxes in Guernsey.
The Plan will also appeal to UK expats with a QROPS that have been non-UK resident for a minimum of 5 complete tax years and are considering returning to the UK, as a QNUPS will prevent their pension funds once again falling under the UK pension regime.
A number of expats may also still be UK domiciled with a potential liability to UK Inheritance Tax. A transfer of assets to the Plan will provide total protection against this potential liability.
In summary the plan offers the following benefits:
■ No UK Inheritance Tax liability;
■ Up to 25% tax free lump sum at pension commencement;
■ No requirement to purchase an annuity;
■ Tax efficiency: no tax on the pension assets within the Plan; pension income paid gross.
■ All remaining funds within the Plan, following death, can be distributed to chosen beneficiaries;
to make contributions with no lifetime limit;
■ Increased flexibility when taking pension income on retirement;
■ Ability to continue making contributions once drawdown has commenced;
■ Up to 25% of the Plan value can be loaned to the member;
■ Choice of investment management;
■ Wide choice of investments, including residential property;
■ Open to all nationalities;
■ No trustee reporting requirement to HMRC;

Contact Derry Thornalley on 0044 1664 444625