Taking control of your UK retirement investment options.
A Qualifying Recognised Overseas Pension Scheme (QROPS) enables you to have more control of your UK pension. It allows you to make use of your hard earned money and save on income tax payable in the UK while you are living in another country.
Factors that influence your pension transfer decision
There’s a lot of inaccurate information on transferring schemes, which jurisdiction to transfer your plan to (including QROPS Australia and QROPS USA) but it’s quite easy to navigate the HMRC website1 to get the basics including a QROPS list of approved jurisdictions2 and plans that is regularly updated.
The HMRC list includes all the schemes that have consented to have their names published. It’s important to note that the HMRC requires schemes to report to them any payments made to members. This is in place for at least ten years from the date of the transfer. An important exception to this is if the plan holder has been non-UK resident for five complete tax years. If this is the case, then they can benefit from more attractive options than those allowed under traditional retirement plans.
Who Does a QROPS Benefit?
A QROPS3 is likely to suit individuals with UK citizenship who who have left the UK to emigrate permanently and intend to retire abroad having built up funds in the UK for retirement.
Why is QROPS so Popular?
The scheme has become increasingly popular with British expats due to the investment flexibility and tax advantages when drawing benefits that it offers. There’s also a degree of currency flexibility that is appealing. Many retirees also state the ability to transfer their benefits to their chosen beneficiaries on death as their primary motivation for going ahead with a transfer. An overseas transfer reduces the inheritance tax liability4 substantially as funds left in the UK are taxed on income at a rate of up to 45% and on death (after the age of 75) at 45%.
When the QROPS list was updated in April 2015, the “Qualifying” tag was dropped. This has led to the list now being known as ROPS – Recognised Overseas Pension Schemes list. The reason for this was to add clarity as schemes on the list may not may not be qualifying. It’s important to note that many of the Australian and New Zealand Kiwisaver schemes were delisted. This was done as they did not meet the new statutory requirements. Most notably, that an overseas scheme cannot be accessed before the retirement age in the United Kingdom.
A Qualifying Recognised Overseas Pension Scheme (QROPS) is a scheme established outside the UK which complies with HMRC regulations.
Introduced in April 2006, it enables individual fund holders, in certain circumstances, to transfer funds from a UK scheme into an overseas scheme. Continue here if you are wanting to find out about a QNUPS. If it’s tax savings and more flexibility you’re looking for, you’ll find it here.
What to look for when considering a QROPS
The choice of jurisdiction and level of investment flexibility offered is important when transferring a UK Pension into a QROPS. Understanding the key factors and benefits that should be offered by QROPS is the first step in choosing to transfer your pension scheme. It’s equally important to understand the conditions when it may not be favourable to transfer.
Qualifying for a QROPS
There are specific requirements that need to be met before one is able to establish a QROPS, and factors such as nationality and tax residency can have an impact. Other factors such as the type of pension structure and whether the individual has taken benefit can affect whether one is able to a QROPS. Do you know all the QROPS Details you can benefit from?
What are the costs ?
When transferring to a QROPS, individuals need an understanding of the costs of establishing a QROPS as well as the minimum values. The question of purchasing an annuity and whether it’s necessary also needs to be addressed. Read more about QROPS Pension Scheme.
What are the tax implications ?
The tax implications of transferring to a QROPS Pension Scheme need to be thoroughly examined and the rate of taxation that a QROPS will attract must be fully understood. Additionally the taxation benefits should be accurately measured to ensure that they outweigh the costs of transferring to a QROPS.
Benefits & assets
Recognise the manner in which assets are handled by a QROPS, such as liquidation of assets prior to transfer, purchasing a residential property with a QROPS and the transfer of assets upon death.