There is a famous quote that says “impatience can cause wise people to do foolish things.” That’s exactly what you would be doing by withdrawing your QROPS pension before the age of 55. If you’ve lived and worked in the UK, and have since moved back to India, a lot of so-called agencies might entice you with offers to withdraw your pension before the time specified by the HMRC (Her Majesty’s Customs & Revenue), which is typically age 55. What they fail to mention, however, is even if the payment does get processed, you automatically incur a penalty of up to 55% of your pension for unauthorized withdrawals. Agencies that are offering these quick fixes at the cost of a person’s life savings obviously have intentions which are not in the best interest of their customers.
We have mentioned multiple times in previous posts how you should double the amount of money you think you will need for retirement to account for inflation, medical expenses, children, grandchildren etc. That being said, the last thing you want is to lose over half your pension because some agent offered you a lucrative scheme where you failed to read the fine print. While there are a lot of schemes on the HMRC website that claim to be QROPS approved, just because they’re on the HMRC website does not mean they are endorsed by HMRC. In fact, they clearly state on their website that it is our responsibility to check whether all parameters set by HMRC are fulfilled by the new QROPS scheme. This can be a difficult task even for experienced agents which is why it is important to choose your financial advisor wisely.
On the plus side, however, transferring your pension to India through QROPS has a number of benefits including much more favorable taxation, tax-free transfer, eradication of 55% death tax and the ability to invest your pension in the Indian economy. This includes low risk ventures with guaranteed interest rates of 10.5%, as well as high-risk/high-reward schemes with no cap on the amount of money you can make. By transferring your pension to India you also avoid the hassle of keeping track of taxes across two countries as well the losses incurred due to currency rate fluctuations.
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.
Is it really possible to invest my UK pension fund in the Indian share market?
Investors looking to invest through a QROPS can invest in equity funds through pension plans, which are typically in the form of large cap funds, flexi cap funds and prime equity funds managed by insurance companies. Making your money make more money is what we do best, contact us to expand your pension portfolio to encompass the Indian stock market.
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.