QROPS and TTFAC
TomLloyd_Read
Member
Hello all
I'd be interested if anyone has any thoughts on this.
A client received an email from their QROPS provider yesterday regarding the LSA and LSDBA and having read it, we just wondered if we'd missed anything in all the webinars and things we'd read. The client transferred most of his UK pensions to the QROPS in 2018 and the one remaining pension in 2020. He hasn't lived in the UK for a number of year and has no plans to return.
It says: "The application of these new rules and the allowances to QROPS members is complicated... the basic position is that these new rules will apply to members of QROPS who are still within the UK’s member payment charges, to whom UK pension rules still apply."
"The main issue for QROPS members is that their allowances are likely to be reduced by an amount calculated by reference to the original fund transfer to the QROPS. Transitional rules have been introduced to ensure that members are not unfairly affected and HMRC have confirmed that these rules apply to QROPS members."
"To ensure that members are not adversely affected by the reduction in their allowances, they need to obtain a transitional tax-free amount certificate before they receive their lump sum from their QROPS. This certificate should ensure that there is no reduction in the allowances from the original transfer to the QROPS, which essentially means the member’s pre-6 April 2024 position is protected. HMRC have informed us that members need to apply to the UK ceding scheme, from which the QROPS transfer was made, for a certificate. "
Does all of this sound right? I thought they had to apply to a scheme they are a member of but they aren't a member of a scheme anymore?! I didn't think a payment from a QROPS used an LSA? Clearly if he still had UK benefits that would be different and a TTFAC may help.
Thanks!
Tom
Comments
I don't believe any of that is right. Yu are right they cannot apply for a TTFAC from the ceding scheme as they are not a member. Unless I've missed something there is no interaction between the QROPS benefits and UK benefits (other than in establishing the initial LSA/LSDBA).
Thanks Les, as I thought. They said they have correspondence from HMRC on the matter which clients could request. I have asked if they could send this to me.
I'd like to see that too. Suitably redacted of course!
Already planned to send it over when I get it!
Hi All,
I'm new to the forum, but found this question as I've been googling regarding how a member of a QROPS may be affected by the introduction of the LSA and LSDBA, and I can't seem to find a definite answer.
I've also had sight of the same email correspondence mentioned in the OP, although not yet privy to the advice the provider received from HMRC.
I would be very grateful if anyone could point me to any source which either confirms or rules out that PCLS payment made from a QROPS would be determined by the member's available LSA?
Although I understand the reporting requirements, In my mind the QROPS and any remaining UK pensions are separate, and any PCLS made from a QROPS shouldn't reduce the LSA, especially now the loophole has been recently closed in respect of UK tax residents being able to take out an EU or Gibraltar QROPS and secure an extra PCLS.
Grateful for any insights.
Picking this up again having finally received something from the QROPS provider. Any thoughts would be appreciated! They have said.
**Re PCLS - **
This PCLS request would be reviewed in line with the HMRC changes implemented in April 2024. In light of this, we will firstly need confirmation from the member on whether he:
If the answer to both questions is no, we would proceed with the below -
We wish to bring to your attention the recent changes to UK pension rules which may impact your client’s QROPS benefits. Please see below for a summary of the key points relevant to their scheme.
Key Rule Changes:
• Lump Sum Allowance: £268,275
• Lump Sum and Death Benefit Allowance: £1,073,100
• New rules now govern the calculation of the maximum pension commencement lump sum (PCLS) payable.
• A tax charge has also been introduced on lump sums above certain limits where the member dies under age 75.
Member’s Position:
• The member has been non-UK tax resident for at least five consecutive tax years and therefore falls outside the UK’s member payment charges regime. Local Maltese pension rules can be applied.
• However, as the fund consists of UK Relevant Transfer funds, UK rules must still be followed, which means the maximum PCLS entitlement is 25% of the fund value.
Transitional Tax-Free Amount Certificate (TTFAC):
• HMRC has confirmed that QROPS members should obtain a TTFAC prior to any lump sum payment.
• The certificate ensures that their pre-6 April 2024 tax-free allowances are protected.
• Without the certificate, their PCLS entitlement could be significantly reduced (potentially to £0). Once a PCLS is taken without a TTFAC, the member cannot apply for one in the future, which may have wider implications if they hold another UK pension or QROPS.
Next Steps for the Member:
1. Apply for a TTFAC by contacting their previous UK pension providers.
2. If a TTFAC cannot be obtained and the fund value exceeds £500,000, we will require the member to sign a deed of indemnity before releasing PCLS (we will provide the deed later if the member chooses this option).
Oh, and BTW, the HMRC correspondence was an email rather than anything more formal.
If the money is already in the QROPS as I understand it PCLS taken in the UK comes off the UK LSA and doesn't impact the QROPS PCLS. The opposite is true too - a PCLS from a QROPS does not come off your UK LSA.
It looks like the QROPS provider is answering some stuff about the QROPS and some stuff about the UK
Thanks Les. That's what I thought.