From 6th April 2006, the rules for UK pension schemes including; retirement annuity contracts, small self-administered schemes, self-invested pension plans, personal pensions and occupational schemes; have been consolidated under ‘Registered Pension Schemes’ – either Defined Benefit or Defined Contribution Schemes.
More flexibility was offered to pension holders in April 2015 meaning that in most cases, 25% of pension pots can be withdrawn tax free whilst the remainder (no matter drawdown, lump sum or annuity income) is taxed at the pension holder’s marginal rate of up to 45%.
If income is sourced in the UK, than non-UK residents are liable to pay UK income tax on those earnings as is the case for earnings of UK residents. If you have a pension in the UK, this is counted as UK source income and so you are taxed at your marginal rate on the 75% that is not included in your tax free sum.
However, a Double Tax Agreement (DTA) between the country in which you are resident and the UK can mean that you are exempt from UK tax – choosing instead to pay tax where you are resident.
There exists a DTA between Singapore and the UK. This means that UK employee pension holders resident in Singapore pay tax in Singapore and are not taxed at source in the UK.
Social Security Pensions and annuities are also covered by the DTA along with pensions ‘paid in consideration of past employment’. All are taxed according to Singapore tax law for Singapore residents.
Government Service Pensions are treated a little differently.
Legislation in April 2015 affects UK taxation on defined contribution scheme benefits. For instance, taxes on benefits are now influenced by whether the pension scheme member passes away before or after reaching 75 years of age. Passing pensions onto beneficiaries is now, in general, less costly. Marginal tax rates are still up to 45%.
Non-UK residents with a QROPS can, in some circumstances, pass on benefits at a lower tax rate when they die.
Gibraltar taxes of 2.5% apply to QROPS held in the jurisdiction as no DTA exists with Singapore. UK income tax does not apply if the person has been non-resident for five years or withdrawals are below £100,000.
Inheritance tax does not apply in Gibraltar and the individual is protected from UK inheritance tax.
Gibraltar QROPS holders are protected from UK death benefit charges if the member is not, and has not been for 5 years previously, a UK resident.
A DTA exists between Malta and Singapore meaning that annuities and payments providing a pension ‘in consideration of past employment’ are taxed in the country of residence only. QROPS pensions, not classed by Malta as pensions ‘in consideration of past employment’, may be taxed based on Singapore residency and in Malta at up to 35%. Government Service and Social Insurance Pensions are slightly different.
UK income tax does not apply if the person has been non-resident for 5 years or more or withdrawals are below £100,000.
Inheritance tax does not apply in Malta and you are protected from UK inheritance tax.
Malta QROPS holders are protected from UK death benefit charges if the member is not, and has not been for 5 years previously, a UK resident.
Tax residents in Singapore pay income tax progressively at rates between 2% and 22% on income sourced in Singapore.
Income from a foreign source is normally tax exempt as long as the individual benefits from the arrangement.
The following constitutes a ‘tax resident’ in Singapore:
For non-residents, income tax is charged on income sourced in Singapore but not elsewhere. Except for directors, non-residents employed for short periods of 60 days or less in a calendar year do not pay tax on the income they earn during such short periods.
For both residents and non-residents, foreign pensions are not taxed in Singapore. Residents receiving income resulting from a partnership in Singapore would be taxed. Individuals are welcome to volunteer to pay tax on foreign income in Singapore. This could have benefits as tax credits can be issued by Singapore to mitigate double-taxation as long as there is a DTA in place (which there is for the UK).
None of; estate, gift, inheritance or net worth taxes are levied in Singapore.
Singapore has 74 DTAs in place.
Leave the Pension in the UK
If the pension is left in the UK, is clearly ‘paid in consideration of past employment’ and is subject to Singapore tax, then UK tax does not apply. However, Singapore would not levy tax in such a situation. Therefore, the income is still subject to UK tax. In this scenario, UK tax of up to 45% is to be paid in the normal fashion with ‘0’ tax paid in Singapore.
Pension payments remitted or received in Singapore can be submitted to be taxed by residents in Singapore and tax relief is then applicable under the DTA. Singapore levies the tax in this case, not the UK. The pension fund will be subject to UK death benefit charges.
Transfer to a Gibraltar QROPS
For those members who have been non-UK residents for five years or more, transferring a pension to a Gibraltar QROPS means not being exposed to UK taxes on income of up to 45%. The member will pay 2.5% tax in Gibraltar and no tax in Singapore whether resident or not. The QROPS is not subject to inheritance tax in Gibraltar and it will also protect from UK death benefit charges.
Transfer to a Malta QROPS
Again, assuming the member has been a non-UK resident for five years or more, this option will ensure the pension is not subject to income tax (up to 45%) in the UK. No tax is paid in Singapore but will be charged (maximum 35%) in Malta. The QROPS incurs no inheritance tax in Malta and assuming 5 years as a non-resident in the UK, it will also protect from UK death benefit charges.
This general information has been provided on the basis of our understanding of the current legislation in the UK, Gibraltar & Malta as of April 2015. Should any of the information provided be inaccurate, incomplete or misleading, we take no responsibility for any reliance placed on it. We recommend that individuals always seek specialist multi-jurisdictional (where relevant) tax advice so that their individual circumstances can be fully considered.