Whilst wanting to take steps to minimise their UK taxes, non-doms may also still want to save for their retirement through an existing pension plan. However, there are a number of issues that they need to take into account.
Firstly, individuals with a pension scheme overseas may qualify for migrant member relief on the contributions made while they are in the UK. This means they will receive the same tax relief as if they were contributing to a UK-based scheme.
Secondly, there are no tax charges on transfers from a UK pension scheme to an overseas one, provided it is recognised by HM Revenue & Customs (HMRC) as a Qualifying Recognised Overseas Pension Scheme (QROPS). Transfers to non-qualifying overseas schemes are taxed in the UK
While transfers out of a UK-based scheme to a QROPS will be subject to the individual’s lifetime allowance rules, the same does not apply to transfers into UK schemes until benefits are received from the scheme.
There are detailed rules defining what counts as a QROPS, but MGI Midgley Snelling LLP can help you understand these to ensure you do not end up with an unexpected tax bill.
To find out more about contributions to foreign pension schemes, please contact us.