India based UK expats
should understand that they can no longer depends on the financial favors from
UK Government anymore irrespective of whether they are in or out of the UK tax
system. It looks UK Government is making clear on this part to UK expats.
For the information of
UK expats there would be a consultation to consider scrapping the personal
income tax allowance for expats.
When it comes to a
question that who receives the allowance, it totally depends on the definition
of an expat. From the tax point of view, an expat is no longer a UK resident
& the member settles in another country & pay taxes there itself. Even
though it does looks like UK Govt has liberated pensions, they are still
decided to collect for Treasury.
So switching one’s
Onshore pensions to an OFF Shore QROPS jurisdiction like india is the
solution to get out of this tax trap. On switching UK pensions to a India based
QROPS the member pays income tax on the pension payments in the country where
he/she is tax resident , not at UK tax rates. India as a QROPS jurisdiction is
the bested suited one for India based UK expats to get their UK pensions
transferred. So that the transferred UK Pension Corpus will
grow tax free @ 8 to 9 % CAGR & the Member will be able to make provision
to pass on the entire grown corpus as tax free lumpsum to the family on his
demise. Till death the Member would have received Pension income also from age
55 onwards as per the conditions of HMRC.
UK
based Indian expats can transfer their UK pensions to a Capital
Guaranteed pension scheme in India, in which they need to buy a Pension policy by paying minimum
premium initially. This minimum premium need
to be paid for next 5 or 10 years depending on one’s age. As a policy feature
one can make additional investments into the policy accountant in the form of Top-ups. So, UK pensions
will be added as extra investments in the form of Top-up to the existing
pension policy. On transferring the UK pensions, after deductions of few
applicable charges the net remaining Corpus in the Account is called Capital
& this capital is will not fluctuate unlike in unlit linked pension
scheme. That means the investment portfolio is not linked to any capital
market.
On
this capital every year Bonus is being declared. Once the bonus is declared
& added to the base transferred capital both Bonus & base transferred
Capital in the Account will become capital & the same is will not
fluctuate. In the subsequent year, on the total accumulated capital the bonus
will be declared. So it’s a cumulative bonus & not
simple revisionary bonus. More over the bonus declared is a tax free
bonus. Hence, the investment portfolio will grow tax free till the completion
of Member’s age 55. (As per UK
HMRC rule your vesting age is 55)
The
Fund Composition in the Capital Guaranteed Pension Policy is mainly Govt.
Securities, Govt. Bonds and Approved Corporate Bonds.
All
premiums including top-up premiums(transferred UK pension fund) paid are
guaranteed to grow at minimum 1% compounded per annum.(all premium means
Gross Premium before deduction of charges & Top up premium means Gross UK
pensions added ). So whatever Gross investments one made plus 1% compounded Growth of the same is
guaranteed. That means, the fund value can never go down & the investment
can only grow up year on year and Invested Capital is Completely Guaranteed.
Also, Following interest rates will be credited to the
IPA(Individual Pension Account) at the
end of the policy year:
1)
Minimum Floor Rate: Your IPA will earn 1% p.a. compounded for
the entire vesting term
2) Additional
Interest Rate: In addition to the above rate, 4% p.a.
compounded
will be credited in your IPA for the first 5 years &
0.5%
p.a. compounded for the remaining year
3) Residual Addition: In addition to the above two rates, this
interest will be credited at the end of each year starting from
policy year 5.
On
completing Member age of 55, he/she can take upto 30% of the total
grown corpus as tax free lumpsum & On remaining 70% corpus, the member will start receiving pension
income till Member's lifetime. On demise of the Member, the entire 70% corpus
will be given as tax free lump sum to the Nominee.
FOR MORE DETAILS & STARTING UP OF THE TRANSFER PROCESS
CONTACT:
Anusuya .R
Financial Advisor
SBI Life Insurance Company Ltd, # 23, Yamuna Complex,
1st Floor, 7th Cross, Malleswaram, Bangalore: 560003.
M +91 9844519872
Email: qropstoindia@gmail.com
