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New QROPS opportunities for Brit expats in USA
| Published: | 15 Oct at 6 PM |
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Over the past two years, the use by US residents with UK pensions of Qualifying Recognised Overseas Pensions Schemes (QROPS) has been complicated by the IRS’s objections to the scheme.
For several years after the introduction of QROPS in 2006, UK pension funds were unable to be transferred to similar US schemes, even although HRMC had recognised the USA as a pension transfer jurisdiction. In addition to the unwillingness of US federal law to recognise the scheme, Capitol Hill continued to judge the UK pensions market as overly generous and disparate and disallowed its introduction into the American system.
For UK expats of retirement age and living in the USA, the new government legislation increasing the qualifying retirement age and hiking tax due on drawdowns came as somewhat of a shock. Recently, a way out of the dilemma was provided by Malta’s various QROPS schemes, which are legally admissible into the USA system whilst UK-based schemes are not.
Basically, Maltese QROPS are recognised products in the States, with drawdowns in dollars able to be taken once a US bank account is established. A 30 per cent sum can be taken tax-free, and the remainder can be drawn down at a tax rate of 2.5 per cent.
Maltese QROPS offer the same flexibility as their UK-based equivalents, giving the pension saver full control of investment strategies according to his risk appetite. Varied schemes can be used for particular requirements such as investing a major proportion of the fund or not investing at all.
One of the original aims of QROPS was to allow expat pension savers closer control over their pension pots and the ability to benefit from the often less burdensome tax codes in other financial jurisdictions. The vast majority of British expats living overseas are able to take advantage of QROPS perks, with those living in the USA finally able to join in.
For several years after the introduction of QROPS in 2006, UK pension funds were unable to be transferred to similar US schemes, even although HRMC had recognised the USA as a pension transfer jurisdiction. In addition to the unwillingness of US federal law to recognise the scheme, Capitol Hill continued to judge the UK pensions market as overly generous and disparate and disallowed its introduction into the American system.
For UK expats of retirement age and living in the USA, the new government legislation increasing the qualifying retirement age and hiking tax due on drawdowns came as somewhat of a shock. Recently, a way out of the dilemma was provided by Malta’s various QROPS schemes, which are legally admissible into the USA system whilst UK-based schemes are not.
Basically, Maltese QROPS are recognised products in the States, with drawdowns in dollars able to be taken once a US bank account is established. A 30 per cent sum can be taken tax-free, and the remainder can be drawn down at a tax rate of 2.5 per cent.
Maltese QROPS offer the same flexibility as their UK-based equivalents, giving the pension saver full control of investment strategies according to his risk appetite. Varied schemes can be used for particular requirements such as investing a major proportion of the fund or not investing at all.
One of the original aims of QROPS was to allow expat pension savers closer control over their pension pots and the ability to benefit from the often less burdensome tax codes in other financial jurisdictions. The vast majority of British expats living overseas are able to take advantage of QROPS perks, with those living in the USA finally able to join in.
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