A QNUPS offers flexibility and the potential for growth to provide for your future.

A Qualifying Non-UK Pension Scheme (QNUPS) is a retirement planning vehicle that offers flexibility and the potential for substantial growth in order to provide for both your future and that of your family.

A QNUPS is an unapproved non-UK pension scheme. This does not mean that QNUPS are not recognised by HMRC; they are in fact defined by UK legislation and a UK taxation treatment of these schemes has been set out by law. Unapproved instead means that the usual taxation benefits attached to approved pension schemes are not in place. For example, contributions to approved UK pensions are subject to tax relief while contributions to QNUPS are not. The positive side to being unapproved (and the side that would make someone interested in investing in a QNUPS) is that there are no limits on the contributions that can be made, and very little limitation on what investments the QNUPS can make.

A QNUPS is able to invest in residential and commercial property both in the UK and overseas, shares in unquoted and personal companies, classic cars, or any other asset that the trustees feel offers suitable investment potential. This represents the real benefit of a QNUPS; when compared with an approved pension scheme making restricted investments with limited funds, a QNUPS allows a sophisticated investor the chance to produce substantially greater returns.

A QNUPS also offers an investor the chance to contribute directly to the growth of their own pension fund. Since a QNUPS can invest in private trading companies, it could acquire shares in a beneficiary’s private trading company, meaning that any growth in value of the company and any dividend payments relating to those shares would directly benefit the pension fund. Many people feel that they will be able to outperform a broad portfolio of shares of the type in which standard pensions might invest. The transfer of shares to the QNUPS should allow post-corporation tax profits to be paid to the QNUPS without additional tax allowing you to use those profits to grow your retirement fund.

QNUPS offer freedom from restrictions

Since a QNUPS is by definition offshore, the building of the retirement fund is virtually exempt from UK taxation. No UK capital gains tax should be payable on the increase in value of trust funds, and with sensible structuring the UK income tax on returns generated by investments should be limited to effective basic rate tax on UK source loan interest and rental income. All other payments should be free from UK taxation. The trustees can even make interest bearing loans of up to 25% of the trust fund to beneficiaries.

This freedom from restriction and taxation should allow a QNUPS that makes sound investment decisions to produce returns well beyond what would be possible through more conventional pension structures. Once retirement age has been reached, the QNUPS falls back into a more familiar pension regime.

This highlights the purpose of a QNUPS. Putting money in and getting it back out is no more tax efficient than a conventional pension. It is the scale and scope of investments and the potential tax-free growth that can be generated within the structure that makes this scheme more attractive for the right investor.

This is an investment rather than a tax decision and as such we would suggest you seek investment advice before deciding whether a QNUPS is right for you. When the time comes to take benefits from the QNUPS, there are a number of alternatives. Unlike many approved pension schemes, there is no restriction on the amount or method by which benefits are taken.

For example, a QNUPS can invest in an annuity and the terms can vary greatly to fit your needs. Often, an element of the annuity is capital in nature (being the amount purchased with your initial QNUPS contribution out of your own taxed income) and so not subject to tax when paid back to you. Available annuities can be fixed or variable, deferred or immediate depending on your circumstance, and the length over which the annuity can be paid will impact on the amount of that annuity that is simply a non-taxable return of your capital and the amount that is the receipt of taxable income.

Upon your death, the balance of the fund can be paid out free from inheritance tax according to your instructions.

Overall, because of the tax benefits that can, with the right advice and planning, be gained together with the flexibility of investments and benefit extractions, a QNUPS deserves serious consideration as part of an individual’s retirement planning strategy.

If you would like more information on setting up a QNUPS to provide for your retirement, please contact Tax Innovations on 01962 856 990 or customerservice@taxinnovations.com.

For an initial consultation please call us on 01962 856 990 or visit our contact page.