There’s an old Chinese proverb that goes: “One moment of patience may ward off great disaster but one moment of impatience may ruin a whole life.” Withdrawing your UK pension early through QROPS ( Before Age 55 ) may sound like a good idea at first but can cause you to lose more than half your pension. That’s right, any withdrawals ( Annuities/ Pensions ) made before the age of 55 are classified as “unauthorized payments” by Her Majesty’s Revenue and Customs (HMRC) and can be taxed up to 55% with the possibility of additional penalties. Additionally, even though the HMRC website has a list of pension schemes that are available for QROPS transfer, it clearly states that it is our responsibility to check that the new schemes are compliant with HMRC requirements.
In case for some reason the new scheme does not comply with HMRC QROPS requirements, a 40% tax is automatically charged on the transfer, this rises to 55% if you try to withdraw ( Annuities/ Pensions ) your pension before the age of 55. So if you’ve lived and worked in the UK, have accumulated a pension there and have since moved to India, you may be tempted by schemes to withdraw your pension before the age of 55 through QROPS. Remember, however, that this automatically disqualifies the scheme as a QROPS and automatically initiates the penalties and taxations. While representatives of many banks and insurance companies might offer you this option, what they don’t mention is the 55% tax which translates to over half your life savings.
On a positive note, transferring your UK pension to India costs nothing, is tax free, and you even avoid a 55% inheritance tax by doing so. India is also the fastest growing economy in the world and is drawing investors from across the globe. As opposed to letting your pension sit in the UK where the economic situation has been questionable (to put it mildly), you could invest your pension in Indian equities and watch it grow.
What is the penalty if a transfer proceeds and the new scheme turns out not to be a QROPS?
If the transfer proceeds and the new scheme is not HMRC-compliant you will be charged a minimum of 40% on the transfer plus an additional 15% for unauthorized withdrawal.
How do I know which schemes are HMRC-compliant?
Our team of QROPS experts are well-versed in HMRC compliance and even provide training to a number of private institutions on the subject. Please contact us to find the best compliant plan for you based on your age, vesting age, and risk profile.
Does it cost anything to transfer my pension fund from the UK to India?
Not only is the transfer of pension funds to approved pension schemes in India tax-free, but you also nullify any loss that would potentially be incurred due to currency exchange rates and similar complications.
How long does it take to transfer a UK pension fund to India through an HMRC-compliant scheme?
While most websites and “agencies” claim it can take up to six months to complete the transfer, at QROPS DIRECT we can get the job done in a matter of 30 days.