Guernsey: QROPS and Non-UK Residents

Last Updated: 6 January 2011
Article by Stephen Collier

Most Read Contributor in Guernsey, September 2018

Originally published in Investment Week, 13 December 2010

Over the past 10 years or so HMRC has been introducing restrictions that limit tax reliefs given to registered pension schemes. It is now debatable whether registered pension schemes in the UK should continue to be the only or main planning tool for senior executives and high earners in their retirement planning says Stephen Collier, Client Services Director at Mercator Trust Company in Guernsey.

For many years the UK Government has encouraged UK resident individuals to save for their retirement through the use of regulated retirement schemes by giving the individuals tax relief on contributions made into the retirement scheme, and allowing the pension funds to grow in a tax efficient environment until benefits are drawn after retirement.

The tax reliefs were generous and on the back of this most pension savings were via regulated pension schemes which now hold many billions of pounds of investments.

However, HM Revenue & Customs ("HMRC") has over the last 10 years or so been introducing restrictions which limits the tax reliefs given to registered pension schemes and for the senior executive or high earner, it is now debateable whether registered pension schemes in the UK should continue to be the only or main planning tool of senior executives and high earners in their retirement planning.

There are new pension savings options available to individuals who still want to save for their retirement, for example Employer Funded Unapproved Retirement Benefit Schemes commonly referred to as EFURBS, but this is not the case for those individuals who have left the UK already. These non-UK resident individuals who have left the UK, for instance because they have emigrated abroad or who were only in the UK for a number of years and have now left the UK, had limited options until 2006 and as a result they would probably have had to suffer the UK tax charges on their registered pension fund unnecessarily.

The restrictions imposed by HMRC which are of significance to the non-UK resident individual, include:

  1. Annual and Lifetime allowances have been introduced to ensure that pension pots do not grow too large e.g. the tax charge on an excess over £1.5m can now be as high as 55%
  2. Where a purchased life annuity is not bought from a life assurance company and the individual dies, the combined pensions tax and inheritance tax charges can amount to 82% of the pension fund. Under the new proposals the Tax Relief Recovery Charge would amount to 55%
  3. The choice of how to invest the pension pot is firmly restricted to retail style investments which limits any entrepreneurial aspirations of the executive

The UK pensions industry experienced a significant reorganisation with the advent of A-Day in 2006 and one of the measures introduced at that time was the Qualifying Recognised Overseas Pension Scheme, referred to as QROPS.

The QROPS is an overseas pension scheme and is suited to individuals who have either already left the UK, or are about to leave the UK. To qualify as a QROPS with HMRC, the provisions of the pension must be acceptable to HMRC and assuming they were, HMRC will allow the funds in the UK pension to be transferred to the QROPS with no immediate UK tax charges.

A QROPS has to be managed by a trustee, and this trustee must ensure that the scheme is moving into a qualifying QROPS and has also been approved by the local Income Tax department. If an individual is moving back to the UK then the QROPS can be retained depending on its technicalities and should be judged on a case by case basis.

Following well documented problems with some offshore centres such as Singapore, Guernsey has become the leading QROPS jurisdiction by proactively developing a good relationship with HMRC, ensuring that the structures are run in the spirit of the UK legislation. The Guernsey regulator has also been active in this area ensuring that the providers of trustee services are appropriately regulated, qualified and kept well informed. The Guernsey QROPS are usually modelled on the Retirement Annuity Trust that has been available to Guernsey residents for many years, and as a result of this, Guernsey QROPS are able to pay benefits without any Guernsey income tax deductions to non-Guernsey residents. This is a considerable advantage to some other jurisdictions where tax deductions are mandatory.

There are significant benefits for the non-UK resident to hold their pension monies in the QROPS, and in brief terms these are:

  1. Annual and Lifetime allowances do not apply so funds can grow freely and not be subject to the above high tax charges
  2. The QROPS pension fund should not be subject to the above pension tax charges, UK income tax or UK Inheritance tax, and therefore the funds can be left to the family of the executive tax efficiently
  3. Pension benefits will be paid by the QROPS with no local withholding taxes, so that the individual will only be taxed by their home jurisdiction
  4. Investment of the pension pot is very wide, thus allowing for entrepreneurial proposals
  5. There is no requirement for the individual to be resident in the jurisdiction of the QROPS provider, which could for example be in Guernsey which is the market leader.

As you would expect, HMRC has introduced safeguards to ensure that the QROPS provisions are not abused, and there is a reporting requirement that every QROPS trustee must agree to, and in broad terms for the five years after the individual has left the UK, the trustee must report to HMRC any benefits that were paid to the individual. The penalty for non-compliance is the non-authorised payment tax charge, and this can be up to 55%.

Therefore a UK regulated pension scheme for a non-UK resident individual exposes that individual to some penal UK taxes that may otherwise be easily avoided if those funds were transferred into a QROPS. The pension scheme arrangements for someone leaving the UK are commonly overlooked as the main taxes (income tax, capital gains tax and inheritance tax) are focused upon by their advisors, but as the UK taxes which are imposed on the UK pension plan can be significant, advisors should now include these in their reviews.

A QROPS case study

Peter is 75 years of age and after working for many years in the UK motor industry he left the UK permanently around five years ago due to poor health, and now lives in Barbados.

The UK pension entitlement that he built up over his career is held in a UK pension SIPP as he has a keen interest in investment matters and likes to choose how the fund is invested. The fund is currently worth approximately £2m and he is drawing a monthly pension income in line with UK GAD rates. His IFA advised that he elect for enhanced protection a number of years ago, which he duly did.

During a routine annual meeting with his IFA, Peter mentioned that he had recently suffered a minor stroke and he wondered what UK taxes would be due if he were to die. The IFA had explained that if he were to die whilst the pension fund was still with the UK SIPP, the new 'tax relief recovery charge' would amount to 55% of the Fund, i.e. £1.10m, which would leave a fund of just £900k for his family to benefit from.

Naturally, Peter was very concerned with this and asked if there was anything he could do to mitigate this tax liability. The IFA advised that Peter might like to consider transferring his UK Pension Fund to a QROPS.

As Peter has already elected for enhanced protection on his pension fund, the fund could be transferred to the QROPS with no UK pension or IHT charges. Once within the QROPS he could still enjoy SIPP type powers over the investment strategy of the Fund, and continue to draw a monthly pension income during his lifetime. The main difference would be that on his death there would be no UK pension tax, tax relief recovery charge or inheritance tax. Therefore the entire £2m fund would be available to benefit his family and dependants giving a real and worthwhile substantial tax saving of £1.1m.

Peter was relieved to hear this and took steps to immediately arrange for the transfer of the pension fund to a Guernsey QROPS provider that his IFA recommended.

For more information about Guernsey's finance industry please visit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions