With a month to go before the new fiscal year starts in the UK, here’s news of a change in the pensions tax rules. Jamie Waddell reports.
If you’re unfamiliar with QROPS you may want to have a look at the beginner’s guide first.
Financial advisers are currently reporting a huge increase in enquiries regarding QROPS, with deVere CEO Nigel Green reporting a 35 per cent increase in January 2014 alone.
So what’s behind this sudden boost?
If you weren’t already aware, the rules regarding the pension lifetime allowance (LTA) are set to change on 6 April 2014. Previously, a maximum of £1.5 million was allowed in your pension pot tax-free. From April this limit will drop to £1.25 million, leaving those with retirement funds that exceed the new LTA facing taxes of up to 55 per cent on the excess.
However, those who qualify for a QROPS (read “expats”) can transfer those funds offshore and thus mitigate their tax liabilities.
It’s more than likely that the majority of you reading this article do not have a pension pot that would exceed this lowered limit, but may already have taken advantage of QROPS to make your more modest pensions go further. If this is indeed the case: what’s your opinion on this? Are wealthy expats right to suddenly switch offshore to save their money? This drop in limit is clearly a move to reap more tax; do the wealthiest amongst us owe it to the struggling UK economy to pay their share?