Qualifying Non UK Pension Scheme (QNUPS)
A QNUPS is a non-UK pension plan which meets certain criteria laid down by HMRC in the UK to be treated for UK tax purposes as a qualifying overseas plan comprising benefits accumulated from contributions made in respect of non-UK employment or self-employment income.
The term Qualifying Non UK Pension Scheme came into being on 15 February 2010 by the enactment of UK Statutory Instrument 2010/51, designed to ensure that accumulated pension benefits of a Qualifying Recognised Overseas Pension Scheme (QROPS:- broadly an HMRC registered non-UK pension plan containing a UK tax relieved contributions) are not subject to UK Inheritance Tax on the death of the member, meaning that the value of the fund is outside of their estate on death.
A non-UK pension plan which meets the QNUPS conditions does not need to be registered with HMRC as a QROPS because it does not contain UK tax relieved contributions.
A QNUPS must be available to residents as well as non-residents of the country in which it is established, be recognised for tax purposes in that country, be regulated if there is a regulatory body that regulates that type of pension scheme in that country, and provide that not less than 70% of the relevant fund is used to provide an income for life for the member.
For UK residents, UK tax relief is not available on contributions to a QNUPS (ie it is funded from tax paid income). For cash contributions there is generally no UK tax issue but for assets transferred to the Plan, a capital gains tax charge may arise on the transfer to the plan if the member is resident in the UK.
UK income tax and Capital Gains Tax is not payable by the trustees of a QNUPS, unless the underlying assets of the fund are situated within the UK; in which case the trustees could be subject to UK tax depending on the asset and the structure of ownership.
Death benefits of a QNUPS are free of UK Inheritance Tax and the 55% Member Payment/Scheme Sanction Charge, which applies on the death of a UK resident member of a UK Registered Pension Scheme or QROPS, does not apply on the death of the member of a QNUPS, because the fund does not comprise UK tax relieved funds.
There is no UK HMRC reporting requirement for a QNUPS (unless it owns UK situated assets and therefore has a UK tax liability) as it does not contain UK tax relieved contributions. From a UK tax perspective a QNUPS is an “unapproved scheme”.
Hong Kong – UK Double Tax Agreement
Significant UK tax benefits are available to a UK resident Contributor drawing a pension income from the Plan having accumulated pension benefits while working in Hong Kong through the Plan, from Hong Kong derived earnings, before returning to the UK to spend his or her retirement there. The same applies to ex-Hong Kong Government workers who have retired to the UK.
In such cases salaries tax is payable in Hong Kong at a top rate of 17% on the pension income paid in retirement and is not taxable in the UK where a claim is made under Article 17 of the UK/Hong Kong Double Tax Treaty, and tax is paid in Hong Kong.
A certificate of tax paid in Hong Kong can be obtained and presented to HMRC annually. This can save up to 28% UK income tax for someone who is subject to UK tax at the top rate of 45% and worked and saved for retirement in Hong Kong and retires to the UK to draw their Hong Kong pension.
If you have left the UK and are seeking to establish your own Retirement Plan to provide benefits in retirement for you, and/or your spouse, and your circumstances are such that an ORSO pension scheme would be fitting, then you should consider the benefits of a Qualifying Non-UK Pension Scheme as a flexible and tax efficient retirement option. If you are a Hong Kong resident and plan to retire to the UK then you should also consider this option.
In addition to the above if you are resident in the UK and you plan to contribute more that HMRC will give tax relief for per year, to a UK registered Pension Scheme, then you should consider the benefits of a Qualifying Non-UK Pension Scheme as a flexible and tax efficient retirement option.