Unlock the Benefits of a QNUPS in These Three Retirement Scenarios
Please be advised that the information in this article regarding QNUPS and IHT is no longer accurate due to the recent changes announced in the UK Budget. Starting in April 2025, the regulations will have significant implications that may affect your understanding of these topics. We encourage you to stay informed and consult with a Soteria Trusts expert to navigate these changes effectively.
Retirement can be a time to relax, but it can also be stressful, especially if you haven’t adequately prepared for it financially. So many unexpected things can happen during your golden years, all eating into your existing provisions and leaving you short. Changes in your general health and healthcare and increasing living costs, to name a few, there are many others that can also wreak havoc on your financial plans. We should perhaps also mention your children and to what level you may be supporting them, even in retirement.
One way to prepare for such surprises is to use a QNUPS or a Qualifying Non-UK Pension Scheme. A QNUPS can help keep your retirement savings safe from creditors, provide tax advantages, and offer more flexible investment options. In this blog post, we’ll explore three retirement scenarios where a QNUPS comes into play.
Related reading: What is a QNUPS?
What is a QNUP, and why it’s beneficial
QNUPS is an HRMC-approved pension scheme that it operated from outside of the United Kingdom. This allows for a plethora of tax advantages and a flexible contribution to the scheme.
Unique features and benefits of QNUPS:
- Available to UK residents and non-UK residents, UK nationals & non-UK nationals.
- You can continue contributing to a QNUPS even after retiring.
- All assets are considered to be outside your estate on day 1, making them an excellent IHT-efficient vehicle.
- You can withdraw your funds with the assurance that any remaining money or other assets will be passed on to your chosen beneficiaries upon your death.
- Unlike most UK pensions, contributions to QNUPS are not limited to earned income.
- You can make cash contributions and/or contribute existing and purchase new assets of your choice into a QNUP.
- QNUPS have no limit on the size of your contribution as long as the saving and investment levels align with your income levels and can be justified as reasonable to maintain your standard of living in retirement.
- Assets held inside your QNUPS generally grow tax-free, although taxes on drawdown may still apply.
- QNUPS are tied to the country where the provider is based, allowing expats the freedom to move without cashing in their savings.
- QNUPS accept a much broader range of asset classes than traditional pensions – these can be property, stocks, shares, and art/antiques, which can either be bought new or existing holdings can be transferred directly to the pension without first converting them into cash.
- Retirement savers can enjoy a tax-free withdrawal of 25% from their QNUPS fund.
How to set up a QNUP and the rules around them
QNUPS are subject to strict eligibility criteria and are only available to individuals who are not residents in the UK. Although a QNUPS provider must be based outside the UK, the retirement saver can be a British resident or expat.
Understanding the difference between residence and domicile is important before making financial decisions. Discuss your options and eligibility with Soteria Trusts.
Three retirement scenarios where a QNUPS outshines other structures
Opening a QNUPS can be of benefit to anyone with UK-sited assets, and QNUPS can be a perfect tool for British expats looking to reduce tax liabilities on their estate.
Scenario 1: You want to protect your assets from potential creditors.
Your retirement years should be worry-free, but what if you have outstanding debts or run into financial troubles with creditors? A QNUPS can provide a safe haven for your assets, protecting them from potential claims. Creditors cannot touch the assets under a QNUPS since they are legally owned by the pension trustee or custodian and not by you.
Scenario 2: You want to pass on your wealth Inheritance Tax-Free
With a QNUPS, you can ensure that your assets are passed to your heirs free from inheritance tax and will also completely avoid the probate process. That is because the QNUPS legislation sets out that all pension assets are outside of your estate and therefore, not subject to UK inheritance tax. As a result, your heirs receive a larger inheritance without the burden of inheritance tax or having to deal with the probate courts.
Scenario 3: You want your pension funds to work harder for you.
For UK taxpayers, a QNUPS can be a tax-efficient way to manage your retirement savings. Instead of relying solely on UK tax laws, a QNUPS can take advantage of the favourable tax laws of countries like Gibraltar, Hong Kong or Malta, where the tax rate can be as low as zero. For example, if you set up your QNUPS in Hong Kong, the Capital Gains Tax on your pension fund will be 0%, and there is no income tax levied on pension distributions in Hong Kong. In addition, Double Taxation or Intergovernmental Agreements that exist between various countries keep taxation to an absolute minimum.
TRUST AND CONTRACT-BASED RETIREMENT PLANS – QNUPSPensions that meet the criteria of being a registered pensions as defined by ‘HMRC’ are exempt from IHT following a member;s death. The trust ensures that the pension assets (your contributions) are kept separate from those of other members and are exempt from CGT once held within the pension. Assets allowed in QNUPS:Investment property, stocks, collections, cars, and much, much more… |
With a QNUPS, you can also choose from a variety of investment options, including properties, stocks, and bonds. Additionally, you can opt for a flexible, or a charitable gifting option, which means you can leave a set percentage of your estate to your favourite cause instead of passing them on to your heirs, and secure a reduction in the overall IHT tax rate your estate pays.
QNUPS for your Retirement and Estate Planning
Retirement can be a complicated and unpredictable time. A QNUPS provides several additional layers of flexibility and security, especially if you’re looking for protection against potential creditors, or shore up the family jewels because sideways disinheritance is on your mind.
If you feel a son or daughter-in-law doesn’t display the genuine intentions you would expect from them, or they don’t have the same level of concern as you have for your child who is in a relationship with them, then you can provision against these things ever taking places and guarantee that none of your assets ever leave the immediate family members.
Let’s not forget that you can also take the opportunity to maximize the benefit of your retirement savings during your own lifetime.
Contact Soteria Trusts advisor who understands QNUPS if you’re interested in exploring this further or obtaining a financial plan for your retirement, or browse our Retirement Plans on your own.
