Weighing up whether or not to get a financial product can be difficult. Professional financial advice from an independent expert is essential before you commit yourself. But in general, what are the benefits of a QNUPS?
Free from inheritance tax
In February 2010, Qualifying Non UK Pension Schemes were introduced by the United Kingdom’s government by a set of regulations that confirmed certain overseas pension schemes were outside the UK’s inheritance tax net.
Inheritance tax is becoming a key concern of Brits who have worked hard to have something to pass on to their children and grandchildren.
By sheltering assets in an overseas pension scheme, a QNUPS provides a legitimate way to mitigate your IHT bill.
QNUPS do not have to be situated in countries that have signed a DTA (Double Taxation Agreement) with the United Kingdom. This relaxation is significant on two levels. Firstly, no DTA means no reporting requirements, so your QNUPS and what happens to it are beyond the reach (and knowledge) of HMRC. Secondly, you have a larger choice of countries that can host a QNUPS.
No maximum limit
Given that pensions typically attract tax breaks, there is usually a limit on the maximum amount that reliefs and exemptions apply to. With QNUPS, this is not the case. Whilst some types of foreign pension schemes may fall under the maximum lifetime contributions rule (where there is a maximum that can attract pensions savings benefits), QNUPS have no limit.
No maximum age for contributions
Why should there be a cut off point when you have to stop adding to your pension scheme? With QNUPS, you can continue to contribute to your pension scheme as long as you want to.
Non-resident and resident members
Depending on the rules of the individual scheme, QNUPS may be available to UK non-resident members. But the IHT exempt status may not be lost if you decide to return to the United Kingdom within 5 years (compared to a QROPS).
Not necessary for contributions to be from earned income
Some pension schemes only offer tax relief and exemptions for money earned in employment. QNUPS permit contributions from assets you have acquired in any way.
Growth is free from CGT
Now that the coalition government has announced a rise in the rate of CGT that is applicable to higher rate taxpayers, this may be a salient point. The assets in QNUPS can grow free from CGT, which means that your family can eventually benefit from the capital growth of your QNUPS assets in full when they inherit them.