Thursday, 26 July 2012

QNUPS – Qualifying Non-UK Pension Schemes


  • Not to be confused with QROPS

  • A pension scheme BUT essentially for UK IHT planning

  • Ideal for ‘in-specie’ transfer of personal assets

QNUPS is important for retirement planning, mitigating Inheritance Tax (IHT) and especially pertinent is the opportunity for ‘in-specie’ transfers. In fact the UK IHT planning element was brought about as a result of lobbying over the original QROPS rules.

 I think the technical description may be necessary. The Inheritance Tax (Qualifying Non-UK Pension Schemes) Regulations 2010 [S1 2010/0511] have introduced this acronym ‘QNUPS’. Weblink gets you to the precise Statutory Instrument (SI).

Professional Advice
I only ever refer to qualified, authorised and regulated advisers. Please email me with brief details and I can be sure to get YOU the best advice available.

Remember that QNUPS is a Pension Scheme
In short, in February 2010, the UK Tax Authorities (HMRC) confirmed that contributions to a Qualifying Non-UK Pension Scheme would be exempt from UK IHT. What this means is that as long as the pension walks and talks like a pension, then the assets held in it will be protected from UK IHT.

Unlike a conventional pension arrangement, although there is no requirement to take an income, Trustees normally insist that a modest income is taken from age 75. That is one of the benefits of using QNUPS for Inheritance Tax (IHT) planning, whilst respecting that this is a pension scheme. Assets other than cash and financial bonds can be put into a QNUPS.

Who might benefit from QNUPS
This is not meant to be an exhaustive list, but I believe there are six categories of individuals who will most benefit from or should consider a QNUPS;

  • Any UK resident who from 6th April 2010 became restricted on their UK pension contributions to basic rate tax relief.

  • UK domiciled persons (that includes many UK citizens who have become, for instance, Spanish residents), and UK residents who want to make pension contributions beyond the UK maximum limits.

  • UK non-residents, including Spanish residents who already have a QROPS but want to add to their pension funds. A classic transfer would be UK savings receiving very little interest, including PEPs and ISA’s. Remember that PEP’s and ISA’s are NOT efficient for UK IHT planning

  • Individuals who want to build an IHT friendly investment, intended as part of retirement planning but not related to their income or employment situation

  • Anyone looking for a way of consolidating their lifetime savings or investments without the restrictive rules of conventional pension planning.

  • Any UK resident or domiciled individual who wishes to build up a pension fund in excess of the current UK lifetime limit

In-Specie Transfers
QNUPS provides an excellent opportunity for in-specie transfers. Investments you have built up, properties you own and other assets can just as easily be a contribution to a QNUPS. The investment does not have to be cash but cash is not excluded. Indeed the investments that can be held in a QNUPS are much less prescribed by HMRC than traditional pensions. Remember, however, that the QNUPS has to be a Pension Scheme but it is also a plan to defend assets from Inheritance Tax (IHT).

Property and property shares can be put into a QNUPS but its important that you have FORMAL advice as the whole QNUPS could be invalidated if not done carefully. The advice I would seek is from a Chartered Tax Adviser (CTA) and have one contact I use regularly.

If any adviser suggests selling your assets and buying another financial structure beware. In-Specie Transfers offer a much more cost effective route, normally, and also selling assets can lead to an encashment charge or even a tax bill (eg Capital Gains Tax).

Residency, Nationality and Domicile
Anyone irrespective of domicile, of any residency or nationality, can commence a QNUPS. However, those who benefit will be anyone with a UK IHT liability.

Please remember that even if you are UK non-resident you may still have a UK IHT liability. You will need professional advice, which I can arrange if you email me with brief details.

This post is brief as QNUPS will vary so much depending on individual circumstances. If you have a query, please ask. Write to me with your circumstances and I will advise how you might proceed but you can do this without any long term commitment. Just email for more details

David Goodall
Financial Pages in Spain