NHS pension transfers for Indian residents - what are your options?
For returning Indians who have worked in the UK for the NHS and have built up sizeable NHS pension pots, there are a variety of options available in terms of how best to maximise the value of their pension investment. This article will examine the key options available to Indian residents who have worked for the NHS and built up a sizeable pension with the NHS pension scheme.
Leave their NHS pension in the UK
The first option for someone who has returned to India after having worked for the NHS is to leave your pension where it is. For some clients this is a suitable option. If, for example you are currently living in India, but may decide at some stage to return to the UK to work, then this may be a viable option. However, if you do not intend to move back to the UK, then the biggest drawback to this option is that your pension will then be subject to 55% inheritance tax charge on your death.
In addition, you are only permitted to draw down a tax free lump sum of 25% of your pension under UK pension rules, whereas with a QROPS scheme you can draw down up to 30% as a tax free lump sum.
Finally, your NHS pension will not have the flexibility to invest in such a wide range of investments as in a QROPS pension in India. Increased portfolio diversification generally leads to enhanced investment returns over the long term.
If you have a final salary pension, such as an NHS pension or a teachers or civil service pension, then your problems are compounded by the fact that once you pass away, your spouse (if he or she is still alive) will only receive half of your pension. For many households, this reduction in income may lead to financial hardship.
And when the surviving spouse dies, payments from the NHS pension will stop altogether, and there is nothing to pass onto your children or grandchildren as a lasting legacy. For most members of the NHS pension scheme, this is one of the biggest drawbacks of the scheme, as most returning Indians will have families that they want to provide for after they have died.
Transfer your NHS pension to a local Indian QROPS Scheme
A second option for returning Indians is to transfer the UK pension into one of the local India QROPS schemes, such as HDFC Life, ING Golden Years or SBI. There are currently 27 Indian QROPS schemes which appear on HMRC’s list of available QROPS schemes.
This option would solve the problem of incurring a 55% inheritance tax in the UK, as your pension would be in India, and not subject to UK pension rules. However, by transferring your pension to an Indian scheme, you then incur a new problem, which is that you are forced to purchase an annuity with your pension proceeds (after you have taken your tax free lump sum).
Annuities are particularly poor investments, and better long term investment returns can be achieved through a professionally managed and well diversified investment portfolio.
In addition, with most annuity based schemes, the annuity payments stop, or are dramatically reduced once you and/or your spouse pass away, and you have the same problem as with an NHS pension – ie that there is nothing to leave to your loved ones or other intended beneficiaries, such as a charity.
Overseas QROPS Schemes
The third option for your UK NHS pension is to transfer it to an overseas QROPS scheme in a jurisdiction such as Malta. If you have no intention to return to the UK permanently, then a transfer to a QROPS scheme in Malta offers a significant number of advantages for residents of India over both UK pension schemes and Indian QROPS schemes, including:
· Avoid 55% inheritance tax on your pension when you die. With a QROPS pension in Malta, you can pass on 100% of your remaining pension to your beneficiaries, without any tax to pay.
· Take a higher tax free lump sum – up to 30% of your pension fund can be taken as a tax free lump sum from a Malta QROPS scheme.
· Increased investment choice and flexibility. With a QROPS scheme in Malta we are able to build a diversified investment portfolio which meets your exact, specific investment needs, including funds which invest in India.
· Avoid buying an annuity. There are nearly always better options for their UK pension, irrespective of their risk profile, and financial goals and objectives. The level of income offered by an annuity will be far lower than the income generated by a more flexible overseas QROPS scheme.
The ability to avoid purchasing an annuity is one of the biggest advantages of a QROPS transfer. Annuity rates offer very low investment returns, and after you/your spouse have passed away, there is generally nothing left to pass on to loved ones.
This view is shared by an increasing number of people – including Indian based finance experts - for another view on annuity plans, read this article - http://www.jagoinvestor.com/2011/10/pension-plans-drawbacks.html
· Choice of currency. With a Malta QROPS scheme you can keep your pension in GBP if you want. This has saved many clients tens thousands of pounds, as the Indian Rupee has lost more than 30% of it’s value in recent years.
Continue to Invest in India and Support the Growth of the Indian Economy by Transferring your NHS pension into a QROPS
It is a misconception that by transferring your UK pension into a QROPS scheme in a jurisdiction such as Malta, you are not able to invest in India and take part in the growth of the ever growing economy.
One of the significant advantages of transferring your pension into an overseas QROPS scheme such as Malta is that you have complete flexibility to invest your pension pot in a wide and diversified range of investments, including in investment funds which specialise in investing in Indian companies.
QROPS Adviser Group have relationships with a range of companies specialising in the Indian market, and can advise clients on the most suitable investment funds according to the investment objectives and risk profile of the individual client.
Is Malta Safe?
This is a question we are asked a lot from Indian residents who are understandably unfamiliar with the vagaries of Malta QROPS schemes. And the answer is a clear yes. Malta is a member of the European Union, and as such has very strict laws governing pensions and financial services. All QROPS schemes that we recommend in Malta are regulated by the Malta Financial Services Commission, and are subject to very strict governance and oversight, including a requirement for an annual audit.
Malta QROPS – the best alternative for Indian residents
For the majority of Indians who have previously worked in the UK and have accumulated UK pension assets, a transfer to an overseas QROPS scheme represents the best opportunity to avoid a 55% UK inheritance tax charge, pass on their entire pension fund to their loved ones, and to create a diversified investment portfolio.
Get a Free, No Obligation Consultation on how to transfer you UK Pension to a QROPS scheme
QROPS Adviser Group (India) are the leading experts on advising residents of India on the best options available for transferring their UK pensions into overeas QROPS schemes.
With offices in London, mainland Europe and India, we are perfectly placed to assist Indian residents who have UK pensions, including members of the NHS pension scheme, and who want expert, independent and professional advice on how to maximise the benefits and returns on their UK pension rights.
Please contact us at [email protected] or call us in the UK on +44 7582 589561 to arrange your free consultation.
Leave their NHS pension in the UK
The first option for someone who has returned to India after having worked for the NHS is to leave your pension where it is. For some clients this is a suitable option. If, for example you are currently living in India, but may decide at some stage to return to the UK to work, then this may be a viable option. However, if you do not intend to move back to the UK, then the biggest drawback to this option is that your pension will then be subject to 55% inheritance tax charge on your death.
In addition, you are only permitted to draw down a tax free lump sum of 25% of your pension under UK pension rules, whereas with a QROPS scheme you can draw down up to 30% as a tax free lump sum.
Finally, your NHS pension will not have the flexibility to invest in such a wide range of investments as in a QROPS pension in India. Increased portfolio diversification generally leads to enhanced investment returns over the long term.
If you have a final salary pension, such as an NHS pension or a teachers or civil service pension, then your problems are compounded by the fact that once you pass away, your spouse (if he or she is still alive) will only receive half of your pension. For many households, this reduction in income may lead to financial hardship.
And when the surviving spouse dies, payments from the NHS pension will stop altogether, and there is nothing to pass onto your children or grandchildren as a lasting legacy. For most members of the NHS pension scheme, this is one of the biggest drawbacks of the scheme, as most returning Indians will have families that they want to provide for after they have died.
Transfer your NHS pension to a local Indian QROPS Scheme
A second option for returning Indians is to transfer the UK pension into one of the local India QROPS schemes, such as HDFC Life, ING Golden Years or SBI. There are currently 27 Indian QROPS schemes which appear on HMRC’s list of available QROPS schemes.
This option would solve the problem of incurring a 55% inheritance tax in the UK, as your pension would be in India, and not subject to UK pension rules. However, by transferring your pension to an Indian scheme, you then incur a new problem, which is that you are forced to purchase an annuity with your pension proceeds (after you have taken your tax free lump sum).
Annuities are particularly poor investments, and better long term investment returns can be achieved through a professionally managed and well diversified investment portfolio.
In addition, with most annuity based schemes, the annuity payments stop, or are dramatically reduced once you and/or your spouse pass away, and you have the same problem as with an NHS pension – ie that there is nothing to leave to your loved ones or other intended beneficiaries, such as a charity.
Overseas QROPS Schemes
The third option for your UK NHS pension is to transfer it to an overseas QROPS scheme in a jurisdiction such as Malta. If you have no intention to return to the UK permanently, then a transfer to a QROPS scheme in Malta offers a significant number of advantages for residents of India over both UK pension schemes and Indian QROPS schemes, including:
· Avoid 55% inheritance tax on your pension when you die. With a QROPS pension in Malta, you can pass on 100% of your remaining pension to your beneficiaries, without any tax to pay.
· Take a higher tax free lump sum – up to 30% of your pension fund can be taken as a tax free lump sum from a Malta QROPS scheme.
· Increased investment choice and flexibility. With a QROPS scheme in Malta we are able to build a diversified investment portfolio which meets your exact, specific investment needs, including funds which invest in India.
· Avoid buying an annuity. There are nearly always better options for their UK pension, irrespective of their risk profile, and financial goals and objectives. The level of income offered by an annuity will be far lower than the income generated by a more flexible overseas QROPS scheme.
The ability to avoid purchasing an annuity is one of the biggest advantages of a QROPS transfer. Annuity rates offer very low investment returns, and after you/your spouse have passed away, there is generally nothing left to pass on to loved ones.
This view is shared by an increasing number of people – including Indian based finance experts - for another view on annuity plans, read this article - http://www.jagoinvestor.com/2011/10/pension-plans-drawbacks.html
· Choice of currency. With a Malta QROPS scheme you can keep your pension in GBP if you want. This has saved many clients tens thousands of pounds, as the Indian Rupee has lost more than 30% of it’s value in recent years.
Continue to Invest in India and Support the Growth of the Indian Economy by Transferring your NHS pension into a QROPS
It is a misconception that by transferring your UK pension into a QROPS scheme in a jurisdiction such as Malta, you are not able to invest in India and take part in the growth of the ever growing economy.
One of the significant advantages of transferring your pension into an overseas QROPS scheme such as Malta is that you have complete flexibility to invest your pension pot in a wide and diversified range of investments, including in investment funds which specialise in investing in Indian companies.
QROPS Adviser Group have relationships with a range of companies specialising in the Indian market, and can advise clients on the most suitable investment funds according to the investment objectives and risk profile of the individual client.
Is Malta Safe?
This is a question we are asked a lot from Indian residents who are understandably unfamiliar with the vagaries of Malta QROPS schemes. And the answer is a clear yes. Malta is a member of the European Union, and as such has very strict laws governing pensions and financial services. All QROPS schemes that we recommend in Malta are regulated by the Malta Financial Services Commission, and are subject to very strict governance and oversight, including a requirement for an annual audit.
Malta QROPS – the best alternative for Indian residents
For the majority of Indians who have previously worked in the UK and have accumulated UK pension assets, a transfer to an overseas QROPS scheme represents the best opportunity to avoid a 55% UK inheritance tax charge, pass on their entire pension fund to their loved ones, and to create a diversified investment portfolio.
Get a Free, No Obligation Consultation on how to transfer you UK Pension to a QROPS scheme
QROPS Adviser Group (India) are the leading experts on advising residents of India on the best options available for transferring their UK pensions into overeas QROPS schemes.
With offices in London, mainland Europe and India, we are perfectly placed to assist Indian residents who have UK pensions, including members of the NHS pension scheme, and who want expert, independent and professional advice on how to maximise the benefits and returns on their UK pension rights.
Please contact us at [email protected] or call us in the UK on +44 7582 589561 to arrange your free consultation.