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