QROPS Pensions for Indian Residents

Each year, thousands of Indian citizens, NRIs and PIOs make the decision to return to India – to either retire, or to work.  Many will have acquired substantial UK pension rights. Some have been working in the UK for a few years before going back to India to further their career. Others have spent their entire working life in the UK and are returning to India to retire.

The vast majority of returning Indians with UK pensions leave these pensions in the UK. However, there are a variety of potential benefits for Indian residents to transfer their UK pension rights into a QROPS scheme:

  • 30% tax free lump sum (instead of 25% under UK pension rules).
  • Receive pension income tax free – income from a QROPS pension is generally paid gross, and pension income is not taxed in India.
  • Take pension income from age 55 (some final salary pension schemes, such as the NHS pension scheme only start pension payments at age 60 or 65).
  • No requirement to purchase an annuity – with UK and Indian pension rules there is a requirement to buy an annuity with your pension after a certain age. However, with a QROPS, there is no such obligation.
  • Avoid UK inheritance tax – by transferring your pension into a QROPS, you avoid paying a 55% UK inheritance tax charge on any remaining pension fund.
  • Pension income can be paid in the currency of your choice.
  • Easy administration – if you have more than one pension, you can consolidate all you pensions in a single QROPS scheme.

Leave a Legacy for Future Generations

The flexibility of the QROPS pension regime enables an Indian resident with a UK pension to leave his or her remaining pension fund to their heirs and beneficiaries upon their death.   In addition to avoiding a 55% inheritance tax charge as mentioned above, the transfer of a UK pension into a QROPS offers additional inheritance and estate planning benefits.

If, for example you had been forced to purchase an annuity, after you and your spouse had passed away, there would be nothing to leave to your loved ones, as the annuity contract would end, and payments would cease.  Contrast the situation with a QROPS, where there are much more flexible methods of drawing an income from your pension – and all remaining funds left over after your death can be passed to your loved ones.

There are similar benefits from transferring final salary schemes into a QROPS. Taking an NHS pension as an example – if you are drawing an income from your NHS pension, in the first instance you would need to wait until you are 60 or 65 to do so. Secondly, when you pass away, your spouse (if he or she is still alive) would only get half of your pension. And when he or she dies, the pension stops – and there is nothing to pass on to your children.

What are the Best QROPS Jurisdictions for Indian Residents?

There are a number of potential jurisdictions to establish a QROPS pension for Indian residents, and the decision will rest on the individual financial and personal circumstances of the individual. The main jurisdictions we use for our Indian resident clients are Malta, Gibraltar and New Zealand.

We would also note that whilst there are locally established QROPS schemes in India, these are generally not the best place to transfer your UK pension, given the restrictions imposed by Indian pension regulations, which require a pension holder to purchase an annuity with their pension fund.

Who Can Apply for a QROPS in India?

You don’t need to be an Indian citizen to apply for a QROPS in India. The following groups of people are eligible to apply:

  • Non Resident Indians (NRIs) who have worked in the UK and ho have returned to India;
  • Non Resident Indians (NRIs) who have worked in the UK but are retiring outside of the UK or India;
  • Persons of Indian Origin (PIOs) who have a UK pension and are returning to India to live permanently – either to work or to retire.

The only requirement is that the UK pension holder has permanently left the UK, and does not intend to come back to live there.

Pension Advice for Residents of India

QROPS Adviser has helped many returning NRIs and PIOs to make the most of their acquired UK pension rights after they have left the UK and returned to India.

If you have recently returned to India, and are looking for independent and professional advice in relation to your UK pension, please contact us for a free, no obligation consultation.