Steve Maraboli, best selling author, and behavioral life sciences academic was quoted stating “’What good has impatience ever brought? It has only served as the mother of mistakes and the father of irritation.” Falling for a QROPS pension scheme that allows you to withdraw your pension before the age of 55 could be that mother of all mistakes, and the father of irritation when you realize you have forfeited over half your pension. That’s right, though a lot of QROPS schemes might entice you with offers of early pension withdrawal, any such withdrawals are deemed unauthorized transactions by HMRC (Her Majesty’s Revenue and Customs) and are liable to incur hefty penalties of up to 55%. This is because any payouts before age 55 automatically disqualifies the scheme as a QROPS and does not recognise any payment as authorized.
If you’ve lived and worked in the UK, and have since moved to India, moving your pension fund to India comes with a lot of benefits with regards to taxations as well as investment opportunities. The problem, however, is that it’s rather easy to make mistakes that would cause you to lose more than half your money to taxes and penalties without the proper guidance. Navigating through the intricacies of HMRC guidelines, parameters, and clauses, is not for beginners and choosing the right financial advisor is key to ensuring a tax-free transfer of your QROPS pension fund to India. Additionally, there are a number of investment opportunities including high risk/high reward opportunities in the Indian stock market, as well as investment opportunities with fixed interest rates of up to 10.5%.
In conclusion, while there are a number of reasons you should transfer your pension fund to India, avoiding the 55% death tax being one of them, it’s important to be cautious while doing so. Any schemes that offer any kind of payouts before the HMRC recommended age of 55 should be avoided at all costs. Another important point to note is that HMRC does not curate or endorse the list of QROPS schemes on their website. This means each scheme has to be checked against HMRC parameters before it can be used as a QROPS. So don’t fall for any schemes that claim to be QROPS just because they feature on the HMRC website, HMRC does not have time to check each new scheme and clearly states that it is our responsibility to do so.
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 financial experts at QROPS DIRECT 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.
How long does the process take?
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.
For further details, get in touch with our team of financial advisors at QROPS DIRECT where we have been helping people transfer their pensions from the UK to India since 2008 and to the tune of over 2.5 billion INR.