New UK’s Pension Schemes Act 2015- Transfers are possible only to ‘Defined Benefit’(DB) QROPS scheme . India based UK expats/NRI’s who accumulated UK pensions should know about Defined Benefit scheme.

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. So it is very important for them to know the changes made in UK’s new Pension Schemes Act 2015. Below are the silent features of new Pension Schemes Act 2015.

The Pension Schemes Act 2015 restricts transfers out of unfunded defined benefit public service pension schemes(like NHS pension scheme/Teachers pensions etc.,) except to other ‘Defined Benefit(DB) Schemes. This means that from 6^th April 2015 transfers are possible where the receiving scheme is a ‘Defined Benefit’(DB) scheme only. At the same time, it also does mean that transfers are not possible anymore, if the receiving scheme is a ‘Defined Contribution’(DC)scheme.

Draft regulations has come into effect on 6^th April 2015 that has restricted transfers out of unfunded defined benefit public service pension schemes(like NHS pension scheme) to Defined Contribution(DC) schemes. That means till 6^th April 2015 HMRC allowed transfers out of unfunded defined benefit public service pension schemes(like NHS pension scheme) to Defined Contribution(DC) schemes also.

The UK Government have banned transfers out of benefits held in unfunded Defined Benefit (DB schemes) public service pension schemes (like the NHS pensions scheme/Teachers pensions etc.,) to scheme offering flexible benefits. This means that a transfer will not be possible if an overseas receiving scheme provides benefits that meets the definition of ‘flexible benefits’ found at section 74 of the pension schemes act 2015. In other words, a transfer will not be possible for ‘Defined Contribution’ (DC) scheme as the DC scheme provides flexible benefits even though the scheme appears on HMRC’s QROPS list on HMRC website. Below details clarifies more on the definition of ‘flexible benefits’ ,

Section 74, Meaning of ‘Flexible Benefits’

In this part ‘flexible benefit’ in relation to a member of a pension scheme or a survivor of a member means,

Ø  A money purchase benefit,

Ø  A cash balance benefit, or

Ø  A benefit other than a money purchase benefit or cash balance benefit, calculated by reference to an amount available for the provision of benefits to or in respect of the member (whether the amount so available is calculated by reference to payments made by the member or any other person in respect of the member or any other factor)

The transfer is not possible, if the receiving scheme provides benefits on retirement or death which are calculated by reference to an amount available for the provision of these benefits (the member’s ‘Pot’ or ‘fund’), whether this ‘pot’ or ‘fund’ is calculated from payments made by the member or any other factor (for example, payments by employers, transfers into the scheme or member payments) ? Usually the member’s pot is invested. Sometimes there might be a  guaranteed rate of investment return.

Because in the UK, these types of benefits are known as ‘money purchase’, ‘cash balance’ or ‘Defined Contribution’ benefits.

NHS made it clear that a letter from HMRC(HM Revenue & Customs) to the receiving scheme with a QROPS number is not sufficient that the scheme is or will remain a QROPS. Similarly, appearance on the published list of QROPS schemes on HMRC website is also not guarantee that the listed scheme on HMRC’s site is or will remain a QROPS(Qualifying Recognised Overseas Pension Scheme).

As stated in the very beginning, the Pension Schemes Act 2015 restricts transfers out of unfunded defined benefit public service pension schemes(like NHS pension scheme/Teachers pensions etc.,) except to other ‘Defined Benefit(DB) Schemes. This means that from 6^th April 2015 transfers are possible where the receiving scheme is a ‘Defined Benefit’(DB) scheme only.

 If the receiving scheme is not ‘Defined Benefit’ scheme(DB), then a transfer is not possible at all to an overseas QROPS scheme even though the scheme appears on HMRC’s QROPS list on HMRC website. For one’s kind information, most of the QROPS scheme’s appeared on HMRC’s QROPS’s list, especially India based QROPS schemes  are ‘Defined Contribution’(DC) Schemes & not Defined Benefit(DB) schemes.

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