Opportunity for Indian,NRI,OCI,PIO's to invest UK pensions in Indian Mutual Funds via Offshore SIPP.

 It is a good opportunity forIndians, NRI's, OCI's & PIO's who had worked in UK & accumulated pensions there. They can Consider SIPP(self invested pension plan) option over QROPS in India.

It should be noted that as per the new HMRC regulation, you should choose QROPS from the country where you are actually tax resident. For example, if you are working in Australia & currently tax resident there, then you should chose QROPS from Australia itself & not form India. If you are working in Australia & choose QROPS in India , then HMRC will tax you 25% & applicable penalty on the transferred pension fund.

On the other hand, there is no such restriction on OFF-Shore SIPP. If you choose SIPP over QROPS to get your UK pensions transferred ,the only condition is you should be Non-UK resident. It doesn’t matter whether you stay in Australia for example, or India. The only requirement is you should be outside UK.

SIPP’s are international schemes based outside UK, like Gibraltar, Malta etc.,Your transferred UK fund can be invested in strong currencies like GBP, USD. We have now managed to get SIPP that can invest in INR also. You can also make currency diversification, like some funds can be invested in USD, Some funds in GBP etc. So that Exchange rate risk is diversified.

The very interesting thing is, you can draw the pension benefits in any currency you choose. For example, if your son/daughter is studying/working in any European country, then you can take benefits in Euro. Similarly in USD, Singapore Dollars etc.,

What is more interesting is that, You Could have options to invest in India based mutual funds that too in INR. This is one example ofIndian Mutual fund to choose in SIPP👇 https://www.franklintempletonindia.com/downloadsServlet/pdf/franklin-india-ultra-short-bond-fund-fact-sheet-islnfdpsinter

Similarly you can choose, Indian Equity Mutual Funds also just like above Indian Debt Mutual funds.

Investing in Indian Mutual funds is the best option for the long term investments.

With SIPP , You can access 100% of corpus after age 55. Off-course, 25% of the total corpus is tax free. Remaining corpus should be withdrawn in parts taking into consideration the tax slab you will fall under in the respective financial year to avoid taxes. But this will not be possible with QROPS in India. With Indian QROPS, you can only access 1/3rd of the total corpus at 55.

Advantages of Investing in Indian Mutual Funds:

Indian Equity Mutual Funds has long history of excellent growth that took lead in creating wealth to the individual investors. Indian Mutual funds proved as the best asset class over any other asset class including Real estate investments in creating wealth over the long run. To make this statement clear, I would like to give the growth story of RELIANCE GROWTH FUND as an example. Please note that, there are number of mutual fund schemes with similar growth. I have just taken RELIANCE GROWTH FUND as an example.

Reliance Growth Fund is a Flagship Equity scheme of Reliance Mutual fund house. This scheme was launched in the year 1995. It was launched with unit price(NAV-net asset value) of Rs 10 per unit. If one has invested Rs 100,000(1 lakh) in the year 1995, he would have alloted 10,000 units(10 Rs NAV). Currently the NAV per unit is Rs 1083.

That means, if you have invested Rs 1 lakh in Reliance Growth Fund-Growth Option then, your current value is (10,000 units * 1083 = 10,830,000) One crore eight lakhs & thirty thousand rupees. That means it has grown more than 100 times of your initial investments in 20 years down the line. The compounded annualised Growth return(CAGR) comes to 22%. What is interesting is, the entire gains are tax-free. 

https://www.mutualfundindia.com/MF/Performance/ReturnCalculator

Most of the Indians had invested amounts like Rs 1 lakh in the LIC polices 20 years back. They do almost get double of the amount invested initially 20 years back as Maturity Value. That means, 1 lakh invested becomes 2 lakhs. Considering inflation rate, this gain of 1 lakh over the period of 20 years lost its value at the current fiscal scenerio. The same 1 lakh invested in Indian equity schemes like Reliance Growth Fund, has become more than 1 Crore, which is a sizeable corpus that had beat inflation rate in the current fiscal scenario. This is the gain that could give power to meet investors financial goal like, power to purchase a house, Higher Education for children, Retirement funds etc.,

So, it is prudent to invest in Indian Equity Mutual Fund schemes for meeting long term goal. If you have accumulated UK pensions, then SIPP(self Invested pension Plan) works better than choosing QROPS in India. Because, in selected SIPP schemes you will be allowed to choose Indian mutual funds to invest your UK pensions . Usually pension corpus accumulated in UK is usually huge. Looking at the potential returns that Indian mutual fund delivers in the long term, it makes sense to diversify in top equity & balanced schemes. The one & formats condition to invest your UK pensions in SIPP, you should be Non-UK resident. It doesn’t matter whether you are resident in India or USA etc., But you should be non-UK resident. 

Where as to choose QROPS in India to get your UK pensions transferred you must be tax resident in India itself. You cannot choose QROPS scheme in India & resident in other country as per the recent HMRC regulations. Even if you are resident in India while getting your UK pensions transferred to a QROPS based in India & if you end up becoming tax resident in some other country(when circumstances changes like Job opportunity etc) within five years of transferring your UK pensions to QROPS in India, this move attracts 25% tax charge by HMRC on the transferred corpus.

On the other hand, this problem is not there with SIPP. As mentioned above the one & formats condition to invest your UK pensions in SIPP, you should be Non-UK resident. It doesn’t matter whether you are resident in India or USA etc., But you should be non-UK resident.

We wish to schedule a free, no obligation telephone or Email consultation to discuss ways we can help yourself and any of your colleagues. You can reach us with the following contact details.
Mr Ravi Kumar. Financial Consultant (Code: 60272381, QROPS Consultancy),

A&B Law & Financial Associates, No-2720, 12th, Main, Jayanagar 4th Block, Bangalore-560 011

Cell: +919844519872

Email: ravi.sampige@gmail.com