Requirements of the HMRC legislation/Conditions for QROPS in India- India based UK expats/NRI’s who has accumulated UK pensions & looking for QROPS in India that meets all the conditions of HMRC to avoid UK tax of 55%.

India based UK expats forms the largest expats in the United Kingdom. Many overseas Indian citizens who have been working in UK as Doctors, Engineers, Teachers etc., have contributed to pension fund in UK & considering to get their accumulated pensions transferred to a QROPS schemes in India for availing higher growth & also for getting special tax advantages.

There are about twelve India based QROPS schemes listed on HMRC’s QROPS list. But, before going into the scheme details, It is good to know the HMRC’s regulations over QROPS . One should be aware that, HMRC do not approve & Guarantee any pension scheme listed on HMRC site as QROPS. Following is the disclaimer clause of HMRC as for as QROPS schemes that are on HMRC site:

“Publication on the list should not be seen as confirmation by HMRC that it has verified all of the information supplied by the scheme in its notification. The purpose of this list is merely to help UK registered. pension schemes carry out their due diligence when transferring pension savings to another pension scheme that is not a registered pension scheme. The list is not to be taken as a recommendation for a particular scheme or product. Nor should it be taken that any scheme featured on the list is approved or backed by HMRC. Completeness of this list”

UK pensioners  including NHS do accepts that  overseas pension schemes (for example, Pension schemes in India) may be open to customers with different retirement needs, so that pension scheme in india cannot be the same as UK pension scheme in terms of policy features. However, UK pensioners would also expect the overseas pension scheme rules(for example, Indian Pension scheme rules)  to have a clause stating that the normal pension age for a member who has UK transferred funds cannot be before age 55 and they also expect to see the HMRC reporting requirements detailed.

All UK Pensioners including NHS understands the requirements of the HMRC legislation including that in the Overseas Pension Schemes (Miscellaneous Amendments) Regulations 2015 are that the receiving scheme is broadly similar to a UK registered pension scheme. The overseas pension scheme (OPS) must be a recognised overseas pension scheme (ROPS) and on the HMRC list of ROPS.

ROPS - As you will know, to be a ROPS a scheme must meet all the following conditions:

· it is an OPS; and

· it satisfies the ‘benefits tax relief test’; and

· it satisfies the ‘pension age test’; and

· satisfy at least one of the two tests

  Test 1: is a test of location/scheme type. At least one of the following points must be satisfied:

· the scheme must be established in a Member State of the European Union, Norway Liechtenstein or          Iceland, or

· the scheme must be established in a country or territory, other than New Zealand, with which the UK has a    Double Taxation Agreement that contains exchange of information and non-discrimination provisions, or

· the scheme must satisfy the requirement that, at the time of the recognised transfer in, the transfer is made     to a pension scheme which is a ‘KiwiSaver’ scheme as defined in section 4(1) (interpretation) of the      KiwiSaver Act 2006 of New Zealand.

  Test 2: requires that at the time of the recognised transfer into the OPS, all four of the following sub-requirements are met:

· the rules of the scheme are such that at least 70% of the funds transferred in will be designated by the    scheme manager for the purpose of providing the member with an income for life;

· the rules of the scheme are such that the pension benefits (and any associated lump sum) payable to the    member under the scheme, to the extent that they relate to the transfer, are payable no earlier than normal  minimum pension age (usually age 55) or earlier ill-health;

· the rules of the scheme are such that membership of the scheme is open to persons resident in the country    or territory in which it is established; and

· if the scheme is established in Guernsey and is an exempt pension contract or an exempt pension trust  under s157E of the Income Tax (Guernsey) Law 1975, then the scheme must not be open to non-residents  of Guernsey.

In order for NHS Pensions to transfer pension benefits the ROPS must be a qualifying recognised overseas pension scheme (QROPS) as defined by HMRC’s legislation.

In order for a ROPS to be a QROPS, certain final steps must be taken and further conditions met:

The scheme manager is the person (or the persons) administering or responsible for the management of the ROPS.

The Scheme Manager of the ROPS must notify HMRC that the scheme is a ROPS providing the following information:

1.       the name and address of the scheme and the date it was set up;

2.       the name of the country or territory the scheme is established in;

3.       name, address, contact details and legal status of the scheme manager;

4.       confirmation of whether or not the scheme is regulated in the country in which the scheme is established. If the scheme is regulated the name and address of the regulator and any reference number allocated by that regulator;

5.       the name and address of the tax authority for the scheme in the country or territory in which the scheme is established. This is not required if the scheme is set up by an international organisation; and

6.       confirmation of how the scheme meets the requirements of being an OPS and a ROPS

7.       provide such evidence as HMRC may require to show that the scheme is indeed a ROPS (which may include supplying a copy of the scheme rules); and

8.       undertake to:

                     · inform HMRC if the scheme ever ceases to be a ROPS; and

               · comply with any prescribed information requirements that fall on the scheme manager; and

               · ensure that their pension scheme continues to meet the requirements to be a QROPS.

The respective client  is required to make their own due diligence to ensure all the relevant conditions have been met by the selected QROPS scheme in India to get his/her UK pensions transferred in order to protect both the UK Pensioner (who is a transferring scheme)  and the member from potential tax charges due to the transfer made to a QROPS in India.

HMRC legislation refers to the requirements expected of the receiving scheme, therefore the members age at the time of the transfer, or the terms of their individual policy agreement with the scheme is not what would determine whether the scheme satisfies HMRC conditions.

The Overseas (Miscellaneous Amendment) Regulations 2015  2 and 3 amend the overseas pension scheme regulations by adding a condition which must be met by a scheme before it becomes a recognised overseas pension scheme. Benefits must be payable to the member no earlier than if pension rule 1 in section 165 applied i.e. no earlier than the age of 55.

One should note that many India based QROPS schemes which appear on HMRC’s QROPS list on HMRC’s official website,  does not appear to satisfy the requirement to be a ROPS because many India based QROPS schemes on the list does not satisfy the ‘pension age test’ in the Overseas (Miscellaneous Amendments Regulations) as many India based QROPS schemes do got following policy features, which is actually not in terms of HMRC’s Pension age rules:

           ·Many India based QROPS allows clients to choose a vesting age between age 45 and 75

           · Many India based QROPS got no clause in main the scheme rules stating that the vesting of UK      transferred funds is not possible before age 55.

In view of above reasons, it would appear that many India based QROPS schemes do not meet the conditions be a QROPS. If an India based UK expat/NRI who has accumulated pensions in United Kingdom & considering to get is UK pensions transferred to a QROPS scheme in India, he/she should make his/her own special due diligence before selecting QROPS in India to get his/her UK pensions transferred in order to save his accumulated pensions from potential UK’s tax of 55%. Other wise, his/her transferred UK pensions will get taxed at the rate of 55% from HMRC-UK.

So it is the duty of the member (who has accumulated UK pensions) to verify whether the scheme is meeting the revised Conditions of HMRC or not. One of the prime conditions of HMRC is that, QROPS should not allow any benefits before age 55. Else the transferred Corpus will attract the UK tax of 55% + Penalty that can go upto 82%. 

Please contact me for an informal chat about the transfer scheme with my following Contact details.

Mr Ravi Kumar. Financial Consultant (Code: 60272381), Exide Life Insurance Co Ltd.

Branch- B 21, # 28, 6th floor, Centenary building, M.G Road, Bangalore-560 001.
Cell:     +91 9844519872, +91 9980927393
Email:  ravi.sampige@gmail.com

India based QROPS Verses(V/S) OFF Shore based QROPS- Which is the best option for India based UK expats/NRI's

Many India based UK expats/NRI's who have been working as Doctors, Engineers,Teachers etc., in United Kingdom would have accumulated UK pensions. many of them do consider transferring their accumulated UK pensions to a QROPS overseas for availing many more benefits like more grwoth, tax benefits etc.,

Many of them might be wondering whether to choose India based QROPS scheme Or OFF Shore QROPS solutions.I have tried to give both merits & demerits of both Indian & OFF Shore QROPS over each other in the following two Scenerio's. So that respective client's who have accumulated UK pensions will be helped. Hope below information would be helpful for India based UK expats/NRI's who have accumulated UK pensions:

Scenario-1

Scenerio-1			Advantages of India based QROPS Over OFF Shore  QROPS
Sl No		India Based QROPS				OFF Shore QROPS
1		Emerging markets like India tend to offer better returns than those offered by developed economies & other emerging markets in the long term since the fundamentals are strong in India				Developed Economies will not produce better returns & Identifying potential emerging markets & particularly potential stocks, mutual funds & other investment options is the most challenging one for Investment Managers & financial advisers since the investment market is geographically huge.
2		The term ‘Guaranteed’ can be found only in India based QROPS. The investment portfolio is not linked to stock market & there will be no investment fluctuations & the entire fund both base transferred NHS pensions & Bonus added are safe & Guaranteed				There is no term ‘Guaranteed’ associated with the OFF Shore investments. The entire investment portfolio is linked with the capital market. The investment portfolio fluctuates as the capital market fluctuates. The investment value can go up drastically as well as down anytime. The investment risk is borne by the policy holder.
3		Regulatory protection- All the insurance companies operating in India are subjected to solvency regulations of IRDA. The minimum solvency ratio is 1.5 times of the insurers liability towards the customer. So there will be a kind of Soverign Guarantee against such risks like ‘Insolvency of Companies’. IRDA is one of the regulators like RBI who regulates banks. Both IRDA & RBI are nothing but Govt of India. So it’s a kind of Sovereign Guarantee. This kind of protection can be found only in India &no where else across Globe.				There is no such concept of ‘Solvency Margin’ protection available with OFF Shore QROPS schemes. The investments  risks is completely borne by the policy holder. In case of economic recession, there is a chance to loose the entire fund following the underperformance of the Investment portfolio.
4		On attaining age 55, the member can take upto  1/3rd of the total lumpsum & on remaining 2/3rd the member will be paid pension income till death. On member’s demise, the entire 2/3rd will be given to beneficiary as tax free lumpsum. It almost works like keeping money in a bank’s safe fixed deposit & taking interest on it in the form of pensions. The entire 2/3rd capital is safe, Guaranteed & tax free.				On attaining vesting age the Member will start getting pension income. The pension rate is fixed based on  Member’s age & UK GAD table. Based on Member’s age & UK GAD table a percentage is fixed stating how much a member can start taking out every year from the accumulated pension Corpus. It’s called drawdown pensions. As member starts drawing pensions out of the corpus, the size of the corpus keeps reducing every year & at the same time the remaining corpus gets invested. Once again investments can go up as well as down. So on member’s demise it is difficult to say, what corpus is left for family. It may be higher than India based QROPS or lesser than that also. Or sometimes with no funds also to pass to family.
5		Easy & comfortable access to policy details like, you can walk into nearest branch office, meet financial consultant in person, since the office branches located in your base resident country.				Comparatively not so comfortable to access your policy details since the concerned offices located in different parts of the world. Also OFF Shore QROPS structure is totally different from India based QROPS. With OFF Shore we need to choose a Trustee (like Sovereign), Custodian insurance company (like Skandia) & QROPS jurisdiction as well as Investment fund houses. So that to get policy details, we need to contact all of the above separately. Where as in India, you need to call just ‘One Point of Service’, for example like ING, LIC etc. There is no such confusions.
6		Majority investments are done in Bond instruments like Govt Securities & AAA rated funds. In India Bonds interest rates are comparatively higher than any other emerging economies. Even Savings banks interest rates in India is more than 3.5% p.a. So that your investments value can only go up & less prone to down turn movement.				Eventhough you got the option of investing in Bonds & Debt instruments there Is no term ‘Guaranteed ‘component associated with the instruments. OFF Shore Bonds will give their stated returns subject to solvency of the issuer bank/company for the stated Bond/Debt maturity term. That means investments in Structured products also carries the same level of risks as if you have chosen to invest in equity based investment products. Moreover, returns with OFF Shore bonds are not beyond 6%.

Added to all the above points, now the very positive development with the Indian political history is, India got the most stable central Govt in the last parliament election-2014 with absolute majority. Since last 30 years, India Govt’s have been running with Coalition due to which the former Govt’s often face many hurdles to bring pro-growth legislations as for as economic issues are concerned. The coalition Govt’s has been forced to protect certain vested interests of different regional political parties. Now the present stable Govt can bring Pro-Growth legislations that will boost the economy. Stock  Market boom is just the reflection of the same. Since fundamentals are strong in India, we expect growth of the economy in the long term.

Scenario-2

Scenerio-2			Advantages of OFF Shore QROPS Over India based QROPS
Sl No		India Based QROPS				OFF Shore QROPS
1		Basically designed for Indian residents & don't suit OCI's as they are Global people				Designed for a more transient population & International advisers are more familiar with them.
2		Investments are held in INR & Investment value is not as much stable before major curr -encies due to heavy INR fluctuations				You can invest in assets in most currencies & can choose to receive payments in your local currency. Major currencies like GBP,USD, EURO are more stable with less fluctuations. So the investment value remains stable.
3		Most India based QROPS allow you to withdraw a  lumpsum of upto 33% of the pension fund on retirement.				In most of the OFF Shore QROPS you can withdraw the entire pension fund except for the 70% of the value transferred from depending on the local rules.
4		Usually offers India based  investments. So returns on investments are moderate				Can offer a wide choice of investments, including share,mutual funds & packaged investment products across the Globe.
5		India based schemes often have complex charging structu res.So its hard to tell whether you are getting value for your money.				Comparitively cost is less & remains uniform through out the term.
6		Once transfer is done to a India based QROPS, the fund gets locked & can't move your pensions to any other alternat ive scheme later if required.				You can take away your pension fund wherever you go &  wherever you want
7		You will not be known exact ivestment details & Investmen t managers.				Expert investment Managers will use their expertise in identifying the emerging markets & potential stocks, Mutual Funds, & other best investment options that can deliver excellent returns. You will be known where exactly your corpus gets invested.

Who am I? 

Let me introduce myself. I am Ravi kumar I have been working as a Financial Advisor for more than 5 years. I have been instrumental in transferring pensions for relatively good number of doctors & other professionals who have relocated from UK to India & other jurisdictions overseas. I promise to offer quality service & my service covers existing Pensions review, Free QROPS Consultations & Guide, Transfer Recommendation Report and much more.

Please contact me for an informal chat about the transfer scheme with my following Contact details.

Mr Ravi Kumar. Financial Consultant (Code: 60272381), Exide Life Insurance Co Ltd.

Branch- B 21, # 28, 6th floor, Centenary building, M.G Road, Bangalore-560 001.
Cell:     +91 9844519872, +91 9980927393
Email:  ravi.sampige@gmail.com