Transfer Your UK Pension to Hong Kong
QROPS legislation allows expatriates to transfer all their pension provision (except state pensions) to a more flexible overseas pension arrangement. Briefly, the benefits are as follows:-
- Overseas pension income is not subject to UK tax, but a UK pension is – whether or not you are UK resident.
Pension funds are free of UK Inheritance Tax for UK domiciled individuals. - The pension fund monies may be invested in a wide variety of investments, (depending on the particular choice of scheme and subject as always to the trustees approval).
There is no compulsion to purchase an ‘annuity’ to provide a regular income during retirement. Moreover, QROPS will make available for your beneficiaries the full value of the pension fund in the event of your death (unlike a compulsory purchase annuity in the UK where the purchase price – around 75% of the entire fund – will be lost forever). - Your Hong Kong employer (if you have one) can contribute up to 15% of your total remuneration to a Hong Kong ‘ORSO’ (Occupational Retirement Schemes Ordinance) Scheme and this amount will not be subject to Hong Kong salaries tax.
- It is relatively simple to set up up a Hong Kong ORSO exempted scheme which qualifies for both Hong Kong and UK tax benefits.
In order for a Hong Kong pension scheme to qualify under QROPS legislation, certain conditions must be met. There must be a Hong Kong trustee registered with the Government Registry; a Custodian to hold assets and investments, and an Investment Adviser to manage the investments.
At present, there is only one off-the-peg QROPS approved trust in Hong Kong (available to the general public). Through this trust you may invest in a variety of investments including shares, bonds, unit trusts, mutual funds, closed-end funds and so on (subject to the trustees approval).
Alternatively, a bespoke pension trust could be tailored precisely to your needs but the costs would inevitably be higher than the insurers arrangement. A bespoke arrangement would however provide immense investment freedom because ORSO investment law is broad and deep with few restrictions on the choice of asset classes. We also have access to a low-cost Guernsey-based QROPS which provides a choice of four risk-graded ‘fund-of-fund’ portfolios. Further details will be provided on request.
The benefits of greater investment freedom - the potential for a better investment return - the ability to take a cash lump sum at retirement, and to pass on the full value of the fund to your beneficiaries, the tax benefits and so on and so forth, obviously need to be weighed up in light of the costs. As a general indication, you can expect the following costs:-
- Trustee set up fees: GBP 300 – 7,500
- Trustee annual fees: GBP 300 – 1,500
- Investment management fees: 1% p.a.
(plus product charges)
Having decided you would like to explore this further, the first step is to contact your UK pensions provider / trustee to request a ‘transfer value’ and a ‘transfer authority form’ (we can do this for you). Upon receipt of this information we will then be able to assess the viability of transferring.
Please contact David Bojan at HFS Asset Management Limited - phone 25118337, fax 28027613 or e-mail drb@hfs.com.hk for further information or to arrange an exploratory no-obligation meeting.
David R. Bojan
Managing Director
HFS Asset Management Limited
Tel: (852) 2511 8337
Fax: (852) 2802 7613
Email: drb@hfs.com.hk