New rules will apply to transfers to QROPS where the transfer is made on or after 6 April 2017
Any transfers received on or after 6th April 2017 will be subject to UK tax rules for five tax years after the date of transfer, regardless of whether the individual is resident or not in the UK for tax purposes. This means that even where an individual has been a non UK tax resident for more than 10 tax years, on a transfer made after 5th April 2017, UK tax rules will apply for 5 tax years after the date of transfer.
You will generally be allowed to take 25% of your pension pot as a tax free amount. The rest will be subject to tax at your marginal rate (the highest rate of tax you pay in a tax year). If you take your entire pension as cash, this may push you into paying a higher tax rate. But as they probably won’t know your other income sources in a tax year, they may use an “emergency tax code” which may well deduct too much tax initially. If you pay too much tax you can reclaim it from HMRC either by completing a P50 tax form, or when you complete a Self-Assessment tax return.
What does this mean?
The transferred funds are locked in until age 55. Once you reach age 55, you are allowed to withdraw 25% of the funds free of UK tax, the same as a person living in the UK.
You may take more than 25% of the funds, but if you take the extra funds within 5 full tax years after the date of transfer, these funds will be subject to UK tax, the same as a person living in the UK.
If you leave the funds until after 5 tax years after the date of transfer, you may withdraw the funds free of UK tax. This is a better deal than for a person living in the UK. They will NEVER be free of UK tax!