QROPS - Tax liability on lumpsum and regular pension

Hi. If someone has transferred NHS pension to QROPS India in 2015-2016 but now due to change in circumstances is a resident in UK and will continue to remain UK resident in future. Can I confirm - 1) the person can take lumpsum of 25% as a tax free amount after age of 55 from this QROPS pot, and would not be added as an overseas income to UK earnings? 2) is it correct that the 5 year residency rule does not apply as it is lumpsum? 3) if person has to withdraw regular pension/annuity after age of 55 - will it attract any tax?. If yes - is annuity income is added as overseas income to UK income and tax liability will be as per tax brackets based on gross income? 4) Are there any other penalties/charges that one need to be mindful either in case of lumpsum or regular annuity income? Many Thanks.

Dear HMRC team, May I have response to above query please. Thanks.

Hi,

Any pension paid from the QROPS will be taxable if the member is UK resident when they receive the pension. To the extent that a lump sum payment is outside the scope of the member payment provisions, lump sums paid to UK residents may be taxed as pension income. 

PTM112010 - International: qualifying recognised overseas pension schemes (QROPS)

The five-year rule was introduced when QROPS were first established in 2006. It applies to the first five years of your residency status if you transferred your pension to a QROPS before 6 April 2017. Ultimately you must have been UK non-resident for five consecutive tax years ahead of retiring or beginning to draw from your QROPS.

Article 20 of the double taxation agreement with India, advises that pensions and annuities are taxble in the UK. 

India: tax treaties

Thank you.

Thank you for the reply which clarified quite a few complex points. However, am I correct in confirming that up to 25% lumpsum payment to a uk resident after the age of 55 is not outside the scope of the member payment provisions and hence will not attract tax. Here the individual is expecting the benefits agreed at the time of such a QROPS transfer made in 2015. The lumpsum amount up to 25% of total pot was offered to be tax free provided the benfit were taken after attaining age of 55 minimum. I understand any regular annuity either monthly or annual would be a taxable income. I thank you in advance for our clarification. Regards.

Hi TaxFinZero,

Under PTM112010 - International: qualifying recognised overseas pension schemes (QROPS): introduction it states that any payment is taxable and doesn't
mention the 25% tax free lump sum.
You may therefore want to contact the pension scheme services  helpline on 0300 123 1079

Thank you.