QROPS Update

4th December 2023

TRANSFERS FROM UK SCHEMES TO QROPS/LUMP SUM BENEFTS – DEATH BEFORE AGE 75

It was announced in the Autumn Statement in November 2023 that a new ‘Overseas Transfer Allowance’  will  be  introduced  on  6th  April  2024.  This  will  be  equal  to  the  existing  Lifetime Allowance of £1,073,100 (or higher if the individual has LTA protections in place).

This allowance will be used to cap the value of UK pension benefits which can be transferred into a QROPS without incurring a tax charge.

Any excess over the new ‘OTA’ of £1.073m will be subject to a 25% Overseas Transfer Charge. This tax charge effectively replaces the Benefit Crystallisation Event 8 LTA test and charge which applied on transfers to QROPS exceeding the LTA limit prior to 6th April 2023. It is worth noting that you are transferring your pension to a QROPS and, for whatever reason, it is not exempt from the ‘ordinary’ OTC that we all know and love, then you will not be double-charged. The tax will apply only to transfers to QROPS where there is an exemption from the OTC.

If you have a pension of more than £1.073m and are considering transferring to a QROPS – and this applies to DB and DC transfers – the transfer needs to be completed by 5th April 2024 to avoid tax on any amount in excess of £1.073m.

Another change to the rules is that there was previously no tax on any lump sum paid from a UK scheme on death of the member before age 75. The new rules introduce a Lump Sum and Death Benefit Allowance (LSDBA) (which is also £1.073m) with 25% tax applying on any excess. However, it has been confirmed that because drawdown income is not tested against this limit, they can pay out the death benefits as income over a short period of time.

However, if you have a pension that you wish to transfer DC funds in excess of the current LTA to a QROPS. As things stood, there would have been no LTA charge, but it might now be liable for the new OTA.  This is a good reason to complete proposed transfers before the deadline of 5th April 2024.

Please contact the team at PLU for more information and a free, no obligation review.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research, nor is it intended as an offer or solicitation for the purchase or sale of any financial product. This information is subject to change.  You should seek advice from a professional financial adviser before embarking on any financial planning activity.

You can call us, Monday to Friday, between the hours of 9am and 5pm CET for help and advice.

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