UK Pension Transfers to QROPS in the Isle of Man
QROPS Isle of Man are overseas pension schemes appropriate for holding British expat pensions living in Bahrain, Qatar, Singapore and a smattering of other countries.
If you have built up a UK pension fund and have moved overseas and no longer tax resident in the UK, your pension is still subject to UK taxation rules. You might have moved abroad to escape the UK, but if your pension has not, it is still subject to constantly changing restrictive UK taxation rules, which may lead to you paying a lot more in tax than is necessary.
Transferring your pension to the Isle of Man if you are moving to Bahrain, Qatar, Estonia or Singapore could well help reduce your income tax bill to zero and reduce your tax on death to only 7.5%.
For pension transfers to the Isle of Man, we prefer the Boal & Co Isle of Man pension scheme, but there are new Isle of Man QROPS launching all the time, so please email us for the cheapest Isle of Man QROPS.
The Boal & Co Select Personal Pension Scheme – “Select” – is a pension scheme established under trust in the Isle of Man, and tax-approved in the Isle of Man under Part 1 of the Income Tax Act 1989.
Select and its professional advisers Boal & Co (the professional trustee, scheme administrator and scheme actuary) are regulated by the Isle of Man Insurance and Pensions Authority (IPA) under the Retirement Benefits Schemes Act 2000.
Select is registered with the UK tax authority HM Revenue & Customs (HMRC) as a Qualifying Recognised Overseas Pension Scheme (“QROPS”). This means that pension transfers made from UK pension schemes to Select are termed recognised transfers and so are permitted transfers under the UK pension legislation introduced by the Finance Act 2004.
Provided the transfer value of your UK pension is less than the UK lifetime allowance (currently £1.5 million), there is no tax payable when you transfer your UK pension into Select.
Best Countries for a Pension Transfer to a QROPS in the Isle of Man
A QROPS in the Isle of Man will be not be taxed on income in the Isle of Man for the following countries:
Australia, Bahrain, Estonia, Poland, Qatar, Seychelles, Slovenia and Singapore, although they would be taxed on death at 7.5%.
For other countries, your pension at retirement would likely be taxed on income in the Isle of Man at a flat rate of 20% which may be less or more than the income that you pay at the amount. There is no personal allowance for the Isle of Man, you pay 20% income tax on the entire pension.
Isle of Man QROPS Case Study for British Client Resident in Singapore
John lives in the UK and is retiring at age 60 with a UK pension fund of £400,000. His twin James lives in Singapore and is retiring there with a pension fund of £400,000 after transferring his UK pension fund (value £266,000) into Select seven years previously.
John’s UK pension is capped at 100% of “GAD tables”. What this means*2 is that John can take a drawdown pension of no more than £19,600 pa, which is equivalent to what an annuity would provide.
James however has a Select pension which is invested in a portfolio of funds chosen by his financial adviser. The portfolio has produced an average return of +6% per annum over the last 7 years. Assuming this +6% pa return continues, James can draw a Select pension of up to £30,500 pa.
There would be no tax on the income in Singapore and the tax on death is just 7.5%.
Isle of Man QROPS Pension Rules
- Here are the expected pay outs from a UK pension transfer to an Isle of Man QROPS.
- Death pre-retirement 100% return of fund value
- Death post-retirement 7.5% IoM tax charge levied on death benefits paid as a lump sum** (100% of fund with spousal drawdown continuation option)
- PCLS Maximum 30% of fund value
- Income tax 20% (0% at source if your country of residence at retirement has a Double Taxation Agreement and your local tax authority can give evidence that this income has been declared and tax has been paid on it.)
- Maximum income basis – Income is flexible and client can choose his income to a certain extent – far more income payable than UK GAD basis (see below)
QROPS Isle of Man Pension Income Example
£100k fund – Male Age 60 – £8,110 76% more than GAD
- Age 65 – £8,950 68% more than GAD
- Age 70 – £10,230 68% more than GAD
(Assumes a 6% annual portfolio return)
Income example for £100k fund – Female Age 60 – £7730 79% more than GAD
- Age 65 – £8,440 72% more than GAD
- Age 70 – £9,500 63% more than GAD
(Assumes a 6% annual return)
Typical fees for Isle of Man QROPS
Set up Fee £995 (Skandia)/£1250 standard basis
Annual fee £995 (Skandia)/£1250 standard basis
QROPS Isle of Man DTA’s
List of Countries Which Have DTA’s with the Isle of Man
Double Taxation Agreements (DTA’s) are not set in stone and they may change over time, however, here is a lit of Double Taxation Agreements between the Isle of Man and various retirement destinations around the world.
Please be aware that the effectiveness and opinion of these DTA’s can always change, however please see below the current existing DTA’s and their perceived effectiveness. These have not been confirmed by the Isle of Man tax authorities or their respective counterparts.
Members transferring pensions should always seek an international attorney’s tax advice for final opinion.
Where taxation is directed to the resident state below, a form must be submitted to the Isle of Man Revenue signed by the country of residence confirming that the member is a tax resident of the country. For example, if you move to Australia, you need a letter from the Australian tax authorities confirming that you are tax resident in Australia.
Furthermore, some of the countries below may tax foreign pension differently to how they treat local pension schemes, for example, notably, New Zealand which taxes foreign pensions.
Isle of Man QROPS Taxation – IOM Double Taxation Agreements
|Argentina||TIEA||14 December 2012||4 May 2013||Isle of Man|
|Australia||TIEA||29 January 2009||5 January 2010||Australia|
|Bahrain||Double Taxation Agreement||3 February 2011||1 January 2013 (Bahrain) 6 April 2013 (Isle of Man)||Bahrain|
|Canada||TIEA||17 January 2011||19 December 2011||Isle of Man|
|China||TIEA||26 October 2010||1 January 2012 (China) 6 April 2012 (Isle of Man)||Isle of Man|
|Czech Republic||TIEA||18 July 2011||18 May 2012||IOM|
|Denmark||TIEA||30 October 2007||26 September 2008||IOM|
|Denmark||Agreement for the avoidance of double taxation on individuals||30 October 2007||1 January 2009 (Denmark) 6 April 2009 (Isle of Man)||IOM|
|Estonia||Double Taxation Agreement||8 May 2009||1 January 2010 (Estonia) 6 April 2010 (Isle of Man)||Estonia|
|Faroe Islands||TIEA||30 October 2007||3 August 2008||IOM|
|Faroe Islands||Agreement for the avoidance of double taxation on individuals||30 October 2007||1 January 2009 (Faroes) 6 April 2009 (Isle of Man)||IOM|
|Finland||TIEA||30 October 2007||14 June 2008||IOM|
|Greenland||TIEA||30 October 2007||11 April 2008||IOM|
|Greenland||Agreement for the avoidance of double taxation on individuals||30 October 2007||1 January 2009 (Greenland) 6 April 2009 (Isle of Man)||IOM|
|Guernsey||Double Taxation Agreement||24 January 2013||5 July 2013*||Guernsey|
|Iceland||TIEA||30 October 2007||28 December 2008||IOM|
|Iceland||Agreement for the avoidance of double taxation on individuals||30 October 2007||1 January 2009 (Iceland) 6 April 2009 (Isle of Man)||IOM|
|India||TIEA||4 February 2011||17 March 2011||IOM|
|Ireland||TIEA||24 April 2008||31 December 2008||IOM|
|Japan||TIEA||21 June 2011||1 January 2012 (Japan) 6 April 2012 (Isle of Man)||IOM|
|Jersey||Double Taxation Agreement||24 January 2013||10 July 2013*||Jersey|
|Luxembourg||Double Taxation Agreement||5 August 2014||19 August 2014||Luxembourg|
|Malta||Double Taxation Agreement||23 October 2009||1 January 2011 (Malta) 6 April 2011 (Isle of Man)||Malta|
|Mexico||TIEA||11 April 2011||4 March 2012||IOM|
|Netherlands||TIEA||12 October 2005||21 July 2006||IOM|
|New Zealand||TIEA||27 July 2009||27 July 2010||IOM|
|Norway||TIEA||30 October 2007||23 August 2008||IOM|
|Norway||Agreement for the avoidance of double taxation on individuals||30 October 2007||1 January 2009 (Norway) 6 April 2009 (Isle of Man)||IOM|
|Poland||TIEA||7 March 2011||27 November 2011||Poland|
|Portugal||TIEA||9 July 2010||18 January 2012||IOM|
|Qatar||Double Taxation Agreement||6 May 2012||1 January 2013||Qatar|
|Seychelles||Double Taxation Agreement||28 March 2013||1 January 2014||Seychelles|
|Singapore||Double Taxation Agreement||21 September 2012||1 January 2014*||Singapore|
|Slovenia||TIEA||27 June 2011||31 August 2012||Slovenia|
|Slovenia||Agreement for the avoidance of double taxation with respect to individuals||27 June 2011||1 January 2013 (Slovenia) 6 April 2013 (Isle of Man)||Slovenia|
|Sweden||Agreement for the avoidance of double taxation on individuals||30 October 2007||1 January 2009 (Sweden) 6 April 2009 (Isle of Man)||IOM|
|United Kingdom||Double taxation agreement||29 July 1955||6 April 1955||UK|
|United States||TIEA||3 October 2002||1 January 2004||IOM|
According to the Isle of Man Income Tax Division, the Island is also in active tax treaty negotiations with a number of countries, including Italy, the Netherlands, and Spain.
A Tax Information Exchange Agreement (TIEA) and an arrangement amending the 1955 Double Taxation Arrangement between the UK and the Isle of Man, signed in Douglas on September 29, 2008, entered into force on April 2, 2009.
The provisions of the TIEA also took effect in the UK and the Isle of Man on April 2, 2009.
The agreement amends the provisions of the 1955 double taxation treaty by adding provisions on the taxation of income from pensions and a mutual agreement procedure.
Under the revised agreement, many pensions paid from the United Kingdom to people living in the Isle of Man are taxed in the Isle of Man only.
As mentioned before, the intricacies of these tax treaties can be quite complex and they can change over time. Please email us for the latest advice.
Click here to see all the latest Double Taxation Treaties with the Isle of Man.