I’m just trying to find out if there is another way to transfer my private pension from the UK to Germany. As I’m over 55, I can withdraw the funds. As @GaryC kindly advised on another thread regarding pension lump sum payments, 25% would be UK tax free, 75% fully UK taxed. The 75% would then be subject to DE progressionsvorbehalt, the 25% fully DE taxed as not UK taxed.
I’m sure there’s no magic way to avoid paying tax though does anyone have experience of QROPS UK to DE transfers? On the gov.uk website, there are only very few DE qualifying companies. Before I speak to any of these companies, I’d really appreciate any advice on pros and cons of doing such a transfer. Many thanks in advance.
UK private pension transfer to Germany - QROPS
Re: UK private pension transfer to Germany - QROPS
Sorry not answering your questions...
But just curious: why are you not in favor of converting your UK pension pot into a UK annuity? Not saying this is better, just wondering.
Cheers,
But just curious: why are you not in favor of converting your UK pension pot into a UK annuity? Not saying this is better, just wondering.
Cheers,
Re: UK private pension transfer to Germany - QROPS
I’m just looking at options. I’ve only small private pensions so annuities wouldn’t be much. I also feel inclined to transfer as much as possible from the UK except my rental property. From the very few QROPS HMRC approved DE companies, I’ve finally found an advisor and will speak to him later today.
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warsteiner70
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Re: UK private pension transfer to Germany - QROPS
Interested in this as well as I am rapidly approaching 55 and have a small UK pension.
Re: UK private pension transfer to Germany - QROPS
Now that the LTA has been abolished i cant think of many reasons to transfer a UK pension to a QROPS, unless your current pension has extremely restrictive scheme rules.
You will need to pay a set up fee, ongoing annual fees and exit fees and they aint cheap.
You will need to pay a set up fee, ongoing annual fees and exit fees and they aint cheap.
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HEM
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Re: UK private pension transfer to Germany - QROPS
The OP could try talking to Paul Downes: paul.downes@crcie.com
Re: UK private pension transfer to Germany - QROPS
Thank you for suggestions. For anyone in a similar situation, it’s definitely worth checking policies before UK pension rules may change.
I’ve only 2 small private pensions. So far, after numerous calls to each UK pension company, I’ve gleaned the following information…..varies slightly in each call.
For both, transfer of lump sums would involve 25% being tax free, the remaining 75% at emergency tax rate…up to 45% emergency tax rate if the policy value is over £30,000 irrespective of the 25% tax free amount. 20% source tax may be possible for smaller withdrawals….very unclear. The ‘up to’ 45% determined by HMRC seemingly decided upon within ca. 14 days of claiming from the pension company.
Transfer to a UK bank account would be much quicker than transferring to a DE bank account.
One policy doesn’t allow drawdown, the other does. However, for one, once drawdown starts, the remaining lump sum can’t be taken in its entirety…policies vary.
Tax on the 75% must be at source. No HMRC exemption form applicable beforehand ie ‘Application for relief at source from UK Income Tax and claim for repayment of UK Income Tax’ (google this, it’s a form on the HMRC website). It would have to be reclaimed. I’ve no idea how quick or straightforward this is?
Contributions can’t be added to my policies as I have been UK non resident for 5+ years.
I’ve given up on looking into QROPS transfers from UK to DE for now. Seemingly, only an annuity would be available from Condor.
Re DE taxation….a little unsure depending on the type of pension policy. One DE advisor suggested that for policies taken out prior to 2005, some if not all payout may be tax free? Other advice is that the UK 25% tax free would be fully taxed here, the remaining 75% subject to DE Progressionsvorbehalt. For me, as I don’t have DE income, the tax percentage would be based in my husband’s tax percentage.
This DE tax year could be beneficial to payout at least one of my UK pensions as my husband has been off work sick for 6 months so he has a much lower income. He’s getting better now thankfully. UK emergency taxation would have to be reclaimed. I’m not sure if through self assessment or a separate claim?
If anyone has any other advice, I’d be very grateful
I’ve only 2 small private pensions. So far, after numerous calls to each UK pension company, I’ve gleaned the following information…..varies slightly in each call.
For both, transfer of lump sums would involve 25% being tax free, the remaining 75% at emergency tax rate…up to 45% emergency tax rate if the policy value is over £30,000 irrespective of the 25% tax free amount. 20% source tax may be possible for smaller withdrawals….very unclear. The ‘up to’ 45% determined by HMRC seemingly decided upon within ca. 14 days of claiming from the pension company.
Transfer to a UK bank account would be much quicker than transferring to a DE bank account.
One policy doesn’t allow drawdown, the other does. However, for one, once drawdown starts, the remaining lump sum can’t be taken in its entirety…policies vary.
Tax on the 75% must be at source. No HMRC exemption form applicable beforehand ie ‘Application for relief at source from UK Income Tax and claim for repayment of UK Income Tax’ (google this, it’s a form on the HMRC website). It would have to be reclaimed. I’ve no idea how quick or straightforward this is?
Contributions can’t be added to my policies as I have been UK non resident for 5+ years.
I’ve given up on looking into QROPS transfers from UK to DE for now. Seemingly, only an annuity would be available from Condor.
Re DE taxation….a little unsure depending on the type of pension policy. One DE advisor suggested that for policies taken out prior to 2005, some if not all payout may be tax free? Other advice is that the UK 25% tax free would be fully taxed here, the remaining 75% subject to DE Progressionsvorbehalt. For me, as I don’t have DE income, the tax percentage would be based in my husband’s tax percentage.
This DE tax year could be beneficial to payout at least one of my UK pensions as my husband has been off work sick for 6 months so he has a much lower income. He’s getting better now thankfully. UK emergency taxation would have to be reclaimed. I’m not sure if through self assessment or a separate claim?
If anyone has any other advice, I’d be very grateful
Re: UK private pension transfer to Germany - QROPS
I vaguely recall a discussion about the tax treatment of UK pensions under Article 17(3) of the DTA but thought we reached the point where things were, let's say, untested.
The starting point is that pensions paid in this context are taxable in the receiving country, i.e. Germany (Article 17(1)). That is overridden by 17(3) if certain criteria are met, namely contributions were made for more than 15 years to that pension UK and were tax-relieved. If these criteria are met the pension is taxable only in the UK but feeds into Progressionsvorbehalt. However, there is a sting in the tail, namely that 17(3) shall not apply if the UK does not effectively tax the pension, if the tax relief was clawed back for any reason, or if the 15 year condition is fulfilled in both countries.
The sting of concern is the "effectively taxed" provision. This has been held by the courts to mean "subject to tax", i.e. taxable. However, under UK tax law the 25% pension lump sum provisions "exempt" such payments from tax, which, of course, means that the 25% is not "subject to tax" and not "effectively taxed". 17(3) is therefore disapplied and 17(1) determines that Germany gets the tax.
So what about the other 75%? On the one hand one could argue that UK tax law makes 2 provisions - 25% tax free and 75% taxable, so each part need to run through 17(3), meaning each part of a pension has to be tested to see if it is effectively taxed. On the other hand one can argue that the pension is a single "thing", so it is that "thing" that is tested, meaning if a lump sum is taken, the pension as a whole fails the test.
I don't know the answer to that but the DTA talks about "a pension", which suggests one views the contractual relationship as a whole, so the test is by reference to that whole. In that case, a way to avoid the pension becoming taxable in Germany would be to forego the lump sum in favour of a higher regular pension amount, or taking the 100% as taxable as a complete withdrawal...
Food for thought...
When you draw your pension it will be subject to PAYE by the pension payer. They will indeed apply an emergency tax code because until that first transaction you do not "exist" for PAYE and therefor do not exist for HMRC as a recipient of taxable income from that source.
After you receive the first payment you would need to submit a form DT Individual (Germany) to HMRC to claim relief from UK tax if you consider 17(1) takes precedence, i.e. 17(3) does not apply. Either way, HMRC will refund any tax overpaid after the end of the tax year, so to some extent you can engineer how long a refund would take.
If the pension is taxable only in the UK then it would be subject to Progressionsvorbehalt in Germany, alongside your rental income, but if you have no income taxable in Germany the answer would seem to be a lemon, as you do not have any tax to pay anyway.
If you were successful with an argument that 17(3) looks at the 25% and 75% as separate things, meaning you are taxable in Germany on the 25% as it is not effectively taxed by the UK, then if taken in the same year, the 75% would feed into Progressionsvorbehalt as you have taxable income in that year.
If the whole amount is taxable only in Germany, the your rental income would impact the rate at which you pay tax.
I am sure Panda can comment on the Germany-specific issues like pre-2005 policies.
Anyway, that's my take...
The starting point is that pensions paid in this context are taxable in the receiving country, i.e. Germany (Article 17(1)). That is overridden by 17(3) if certain criteria are met, namely contributions were made for more than 15 years to that pension UK and were tax-relieved. If these criteria are met the pension is taxable only in the UK but feeds into Progressionsvorbehalt. However, there is a sting in the tail, namely that 17(3) shall not apply if the UK does not effectively tax the pension, if the tax relief was clawed back for any reason, or if the 15 year condition is fulfilled in both countries.
The sting of concern is the "effectively taxed" provision. This has been held by the courts to mean "subject to tax", i.e. taxable. However, under UK tax law the 25% pension lump sum provisions "exempt" such payments from tax, which, of course, means that the 25% is not "subject to tax" and not "effectively taxed". 17(3) is therefore disapplied and 17(1) determines that Germany gets the tax.
So what about the other 75%? On the one hand one could argue that UK tax law makes 2 provisions - 25% tax free and 75% taxable, so each part need to run through 17(3), meaning each part of a pension has to be tested to see if it is effectively taxed. On the other hand one can argue that the pension is a single "thing", so it is that "thing" that is tested, meaning if a lump sum is taken, the pension as a whole fails the test.
I don't know the answer to that but the DTA talks about "a pension", which suggests one views the contractual relationship as a whole, so the test is by reference to that whole. In that case, a way to avoid the pension becoming taxable in Germany would be to forego the lump sum in favour of a higher regular pension amount, or taking the 100% as taxable as a complete withdrawal...
Food for thought...
When you draw your pension it will be subject to PAYE by the pension payer. They will indeed apply an emergency tax code because until that first transaction you do not "exist" for PAYE and therefor do not exist for HMRC as a recipient of taxable income from that source.
After you receive the first payment you would need to submit a form DT Individual (Germany) to HMRC to claim relief from UK tax if you consider 17(1) takes precedence, i.e. 17(3) does not apply. Either way, HMRC will refund any tax overpaid after the end of the tax year, so to some extent you can engineer how long a refund would take.
If the pension is taxable only in the UK then it would be subject to Progressionsvorbehalt in Germany, alongside your rental income, but if you have no income taxable in Germany the answer would seem to be a lemon, as you do not have any tax to pay anyway.
If you were successful with an argument that 17(3) looks at the 25% and 75% as separate things, meaning you are taxable in Germany on the 25% as it is not effectively taxed by the UK, then if taken in the same year, the 75% would feed into Progressionsvorbehalt as you have taxable income in that year.
If the whole amount is taxable only in Germany, the your rental income would impact the rate at which you pay tax.
I am sure Panda can comment on the Germany-specific issues like pre-2005 policies.
Anyway, that's my take...