Clarity on overseas pensions lacking from Legislation Day
The policy objective behind the draft legislation and supporting papers in relation to pensions serves to counter two manifest concerns. It aims to remove distortions, amassed over years of changes to pension tax legislation, which have led to pension schemes being increasingly used, and (overtly) marketed, as a tax planning vehicle to transfer wealth rather than for funding retirement. It also aims to remove inconsistencies in the inheritance tax treatment of different types of pensions.
However, what it doesn't clarify is how the proposed legislation will apply to overseas pensions; Qualifying Non-UK Pension Schemes ('QNUPS') and Qualifying Recognised Overseas Pension Schemes ('QROPS'.)
The expectation is that QNUPS and QROPS will be treated on the same footing as UK pensions for UK inheritance tax purposes and aggregated with the free estate subject to availability of the spousal or charitable exemptions.
But what about the relevant property regime and the ten year anniversary charges and exit charges? Will the prevailing exemptions endure? For some this will not be an issue in any event but many are in the throes of changing their tax status and it's highly relevant.
This feels like a missed opportunity to provide clarity and enable private client practitioners and their clients time to ruminate and act upon the optimum solution before the tax legislation comes into force.
If you are non-resident or thinking of becoming non-resident and are impacted by these tax changes please contact me on +44 207 665 0848 or rsmith@vwv.co.uk