QNUPS - qualifying non-UK pension scheme

A QNUPS can be thought of as like a QROPS but with some differences. Potentially suitable for anyone who wants or needs an international pension scheme. They are occasionally marketed to high net-worth individuals who have already utilised their maximum income tax relievable pension contributions in the UK.

Residency considerations

No restrictions on residence – you can live where you want and have a QNUPS. But the tax treatment of the scheme will depend on your country of residence and needs to be ascertained.

Reporting considerations

There are no HMRC reporting requirements currently. But unlike a QROPS, QNUPS are not permitted to receive transfers from UK tax-relieved (registered) pension schemes.

Income can be taken at the age of 55 or deferred until the age of 75 but must be taken before your 76th birthday.

Since 2017, 100% of the income taken from a QNUPS or a QROPS by a UK resident is subject to UK taxation.  

A Guernsey QNUPS follows Guernsey Revenue Service rules in terms of determining income. Income drawn from a QNUPS may be liable to tax in the country of residence at the time the income is taken.

QNUPS are generally sold as shelters from IHT, rather than access for income by the member. Fairfield will only promote the scheme by providing a relevant pension. Some are promoted without this fact which defeats the object of setting up a QNUPS and may place the relevant funds at risk in the future.

You can get up to a 30% tax-free lump sum at age 55+, though is generally of no relevance. 

Funding restrictions

Assets may not have to be liquidated before transferring them to a QNUPS, this is more an advantage than a restriction. Though there may be taxation issues, such as Capital Gains Tax if you live in the UK, which is why it is always pertinent to obtain financial advice.

Technically, almost any asset class can be transferred to a QNUPS – including ‘alternative investments’, such as antiques, residential property and fine wine. Subsuming UK property may present other tax challenges. Most Trustees prefer that the asset has some form of identifiable title. 

Funding has to look like pension funding - as a rule of thumb, consider 20% of annual income to be acceptable.

There is no maximum age however over 75 will require the scheme to be in drawdown immediately.

Inheritance tax and death considerations

A QNUPS is exempt from UK taxes on death unless the QNUPS member is deemed to have deliberately reduced the value of their estate immediately before death by transferring a significant part of their estate to the QNUPS.

This is a matter where HMRC has some discretion makes the matter subjective, and so HMRC could mount a challenge if a transfer occurred shortly before death, and taxes would then be applied. There is immediate protection from IHT.

There is currently no limit on contributions. However, HMRC is increasingly looking at offshore structures, so it’s best to restrict overall contributions to a proportion of your net worth – for example, 50%.

100% of the QNUPS fund is transferable to beneficiaries.

There is no UK tax relief on the amount invested.    

As these are often sold as inheritance tax protection vehicles, they have to be used carefully and advised on properly and technically and regularly reviewed. This is all part of the long term costs that need to be taken into account.

There is no exemption from pension sharing rules on divorce.