What is the process of transferring my UK NHS pension into a QROPS in India?
This article will focus on how an Indian resident can transfer his or her pension from the UK into a QROPS scheme in order to benefit from more flexible investments, higher rates of investment returns and a variety of taxation benefits. We will also cover in this article the additional requirements for a former employee of the NHS to transfer their NHS pension into an Indian QROPS scheme.
As an incidental point, if you do have an NHS pension, then you need to be aware that the UK government has announced plans to ban transfers of NHS pensions into QROPS schemes as of 5 April 2015, and so if you have an NHS pension and have returned to India, it is imperative that you seek advice as soon as possible, because after April 2015 you will not be able to transfer your pension, and will have to wait until you are 60 to receive your benefits.
Obtain a transfer valuation for your UK or NHS pension
The first stage in the QROPS transfer process is to obtain an up to date and valid transfer valuation for your UK pension, or ‘Cash Equivalent Transfer Value’ (or ‘CETV’). This will be obtained by your financial adviser on your behalf, by you signing a Letter of Authority which will enable the financial adviser to contact the pension administrator directly.
Also at this stage, the financial adviser will also request that the UK pension administrator will provide pension discharge papers, which are require to be complete by both the client and the QROPS trustee, in its capacity as receiving scheme.
Please note that for NHS pension transfer, there is an additional form which is required to be completed, which is the Form TV27, which requires the NHS scheme member to provide some additional information to the NHS.
How long does it take to receive the CETV?
The answer to this question will depend very much on the individual UK pension scheme. Some UK However, other schemes, usually final salary schemes take much longer. The NHS scheme takes around 2 months to process a transfer valuation request from the time it receives the paperwork.
Another factor to bear in mind is whether the scheme will accept email instructions from a financial adviser. If this is the case, then this speeds up the process considerably. This is especially so for QROPS / NHS pension transfers for India residents, where there are logistical issues, and which can take up to 2 months to process. Some private pension schemes are very efficient, and can process a transfer valuation in less than a week. For pension schemes which can process email valuation requests, such as the NHS scheme, the process for Indian residents is made much easier, as after they have scanned the letter of authority to their QROPS adviser, their NHS pension valuation request can be processed the same day.
Deciding on the best QROPS scheme for Indian residents
After the valuation has been received, your financial adviser will then discuss with you the best QROPS scheme for you to transfer your pension to in India. At this stage, there are several options.
The first option is to transfer your pension to a local Indian QROPS scheme such as SBI, ICICI Prudential, HDFC Life. These schemes offer early access to your pension (as low as 30 in some cases), and a guaranteed annuity income for life. This option has proved very popular for many resident of India who have transferred their UK or NHS pension to India.
The dangers of Indian QROPS schemes
However, in recent months, many problems have started to emerge with these schemes. The UK government has started to clamp down on QROPS schemes which allow scheme members to access their pension early. The pension rules in the UK are very clear – a pension must be used to provide an income in retirement, and if an Indian QROPS scheme allows a member to take their tax free lump sum along with an annuity income, from the age of 30, then these schemes are going to face problems.
In July 2014, these potential problems became a reality when 15 out of the 27 Indian QROPS schemes were removed from the HMRC’s official list of approved QROPS schemes. Those remaining still offer early access to pension funds, and so it is probably only a matter of time before these schemes are also banned from the HMRC list.
Consequences of a banned India QROPS scheme
The consequences of transferring your UK pension into a local QROPS scheme in India, taking your tax free lump sum, and then subsequently having this scheme banned from the HMRC list are very serious. The HMRC will impose a 55% tax charge on any funds you have withdrawn – and even if you have already spent the money, the UK tax man will come after you in the Indian courts, and you could potentially lose your home.
Malta or Gibraltar QROPS schemes as a safer alternative for your QROPS pension
If you do not want to take the risk of losing 55% of your UK pension after you have transferred it into an Indian QROPS scheme, then you should consider transferring your pension into a scheme in a safer jurisdiction such as Malta or Gibraltar.
India and Malta recently signed a double taxation treaty, the result of which means that all pension income received by the QROPS scheme member in India is received completely tax free. This has made Malta the jurisdiction of choice for residents of India who wish to transfer their UK or NHS pension to India.
Malta has one of best QROPS pension regimes on offer, and can boast the following features and benefits:
- 30% tax free lump sum available, as opposed to 25% under tax rules,
- Able to take pension benefits from age 50 – as opposed to 55 under UK rules, and age 60 under the NHS pension scheme rules,
- Investment flexibility, meaning that you can invest in a wide selection of investment funds, as opposed to being forced to purchase an annuity with your pension fund,
- Malta is a member of the EU, and as such is under very strict rules and regulations governing pension companies and QROPS trustees.
Can I invest in Indian companies through Malta?
This is a very common question that we are asked. One of the biggest advantages of transferring your NHS pension into a scheme in Malta is that you are free to create your own, bespoke investment portfolio, which can include investing in Indian investment funds. The Indian economy is very strong at the moment, and clients are free to take advantage of, and participate in, the growth of one of the biggest economies in the world.
If you would like more information on how to transfer your UK pension into a QROPS pension after you have returned to India, then please call the QROPS Adviser Group in the UK on +44 7582 589561 for a completely free, no obligation consultation, or email us at firstname.lastname@example.org.