Making a decision on the best option of where to transfer your UK pension is a daunting task, and depends on your personal situation. The details of your needs and objectives must be taken into account when planning ahead; a QROPS might be a solution to your retirement objectives as it allows for flexible investments and various tax benefits which provides for greater capital growth and income.
Listed below are some of the points that will help you understand ‘What is a QROPS’ and whether or not a UK pension transfer to a QROPS is an option for you.
A Qualifying Recognised Overseas Pension Scheme (QROPS1 ) is, as the name suggests, an overseas pension scheme based outside the UK. This new form of the pension was introduced in April 2006 by the authorities to facilitate the ease of transfer from a UK pension to a fund in another place. Many ex-pats choose to take advantage of a QROPS transfer to safeguard their capital and maximize their retirement benefits.
The HMRC2 has removed many restrictions expats abroad faced when wanting to transfer their UK pensions to the new place of residence. This is where a QROPS can make a big difference as it possible for anyone with a UK pension abroad to have more control over their pension and receive their pension without difficulty.
Is A QROPS for Me?
If you are considering becoming a resident in a province or planning to retire overseas then it might be worth looking at a transfer of your UK pension to a QROPS. Also, if you are a resident who has worked in the UK for a number of years, and have now moved back to your country of origin there could benefit from transferring your UK pension to a QROPS in your current place of residence.
A QROPS allows ex-pats to legally transfer a UK pension to their country of residence, thereby taking advantage of the pension rules and tax benefits3 of that law. A UK pension transfer gives you greater control over the management of your fund, allowing for increased investment. If you are approaching retirement and want to move to another place such as the US, Europe or in fact anywhere in the world, you would be wise to choose a QROPS transfer.
QROPS In Brief
Briefly, a QROPS is an HMRC approved overseas pension scheme that is eligible to receive transfers from an authorized UK pension. A QROPS gives ex-pats the opportunity to invest in a pension account offshore, with the flexibility to invest and use their pension in a way that would not normally be allowed in the UK. It has tax benefits that allow a pension investment to grow at a faster rate than if it was subject to income tax payable in the UK. The laws and safeguards governing QROPS vary from one country to another but are generally more favorable than those in the UK.
One of the important things about a QROPS is choosing the correct QROPS based on your situation. It is important to note that your capital be transferred to a QROPS could be liable to certain taxes in your chosen province. It is advisable to talk to a financial adviser regarding taxes and other charges.
It is essential that you understand the benefits, process, and consequences of forming a QROPS. You can write to us and speak to our reputed financial adviser for any question you may have regarding a QROPS explanation.
If you are considering retiring overseas with the intention of becoming a resident in a province then a UK pension transfer to a QROPS might just be the response.
Before the introduction of QROPS (Qualifying Overseas Pension Scheme) various laws and regulations were in place that did not allow easy transfer of a UK pension to other countries; whereas now it is possible for UK pension holders living outside the United Kingdom to transfer it to their country of choice.
When looking at investing in a QROPS, there are a number of aspects that you need to take into consideration. Factors such as pension structure, nationality, tax residency, etc. should all be taken into account. There are many thousands of Britons living in other countries and if you are not a member of a QROPS already, you might want to consider transferring your UK pension to a QROPS. A UK pension transfer to a QROPS will allow you greater investment and control over your pension whilst receiving valuable tax benefits.
The following outline of QROPS eligibility criteria will help you understand if you pass.
Who Can Apply?
Any resident who is planning to move out of the UK within the next 12 months or are currently living overseas and have a personal or corporate pension scheme can pass for a QROPS. Foreigner employees who have worked in the UK and contributed to a fund and subsequently returned to their country of origin may also pass for a QROPS. An individual who qualifies may be able to transfer their UK pension to the country where they are currently resident or perhaps a different province altogether.
- Must be between 18 and 75 years
- Should have a private pension scheme and NOT a Government or State pension scheme
- Should be retired overseas and been a non-tax resident for 5 consecutive fiscal years or more
- Should NOT have taken annuity on your pension
- Should have sufficient funds to justify set up cost
- Should NOT have taken payment on your final salary scheme
UK Tax Residents Can Apply If:
If they intend becoming a non-UK tax resident within the next year
When they have arranged accommodation in their chosen law
If they intend emigrating to that country for employment or retirement
- You do not score for a QROPS if you have taken it before
- If you have taken a lump sum benefit, you can pass for a QROPS
QROPS provides ex-pats with an invaluable option for managing and growing its fund offshore. It is important to safeguard your investment and avoid taking unnecessary risks with your fund so it is advisable to contact an authorized financial adviser with expert knowledge of the tax laws and legal requirements of a particular law. Expert financial advisers4 are in the position to respond to your questions on your QROPS eligibility, taking into account your individual circumstances.
What You Can Invest In A QROPS?
When transferring your UK pension to a QROPS, you will need to understand the manner in which resources are handled by a QROPS, such as liquidation of existing capital prior to transferring to a QROPS, purchasing a residential property with a QROPS and the transfer of resources to beneficiaries upon death. Here are some things you need to know about QROPS capital transfer:
Liquidation Of Assets
The structures and benefits of different QROPS vary and each one has its own conditions. When it comes to the liquidation of capital prior to taking a QROPS scheme, again each QROPS capital transfer is different and it depends on the particular QROPS scheme you are investing in as to whether this is necessary.
Some QROPS schemes will allow you to transfer your existing pension funds directly into the QROPS whereas other will require your resources to be liquidated before taking a QROPS and they will only transfer cash.
Purchasing A Residential Property
One of the questions that are commonly asked when taking a QROPS scheme is whether the individual can purchase a residential property with a QROPS. There are a couple of factors that determine whether you can purchase a residential property with a QROPS. Some of the factors are:
- How long you have been living outside the UK
- Have you been a UK resident during the last 5 tax years?
- Purchasing a property is possible through an offshore company
Purchasing a property with a QROPS is possible but you must have been residing outside the United Kingdom for the required number of years. If you have returned to the UK and have been a UK resident during the last five (5) tax years then UK pension rules will apply to you and you will not be able to hold property in the QROPS. After five (5) tax years, your QROPS pension scheme will be subject to legislation in the chosen law, you may be able to purchase a residential property at this time; however, it will be only through an offshore company.
QROPS Assets Transfer Upon Death
Your QROPS are transferred to your named beneficiaries upon your death and, depending on the province, given to them without paying any inheritance tax. It must be established that this tax relief benefit is available prior to invest in the QROPS scheme.
Other QROPS Benefits
- An annuity to your spouse or dependants
- Capital grows in a safe (HMRC approved) tax-efficient environment
- Transfer of your proceeds into a new plan for named beneficiaries
- Retention and distribution of your QROPS at predefined date (within 2 years of death)
- Capital may be held and the pension paid out in any major currency
- Closing your plan and payment to your estate or named beneficiaries
A QROPS gives ex-pats the opportunity to transfer their UK pension to an HMRC approved offshore pension fund. Protecting and growing your resources within a QROPS makes the decision on which jurisdiction to transfer your UK pension to a daunting task, and depends on your personal circumstances. Expert financial advisers are in the best position to offer sound advice to people retiring overseas, taking into account your individual needs and specific requirements for QROPS.
I am an ex-pat looking to retire abroad: What should I do about my UK pension? If you are planning to transfer your UK pension to an offshore QROPS pension scheme, here are some QROPS transfer next steps you can follow.
You will need to investigate the various QROPS schemes options and decide which one is best for you; a QROPS must be recognised by HMRC which means that it is eligible to receive transfers from your registered UK pension fund.
Do I Qualify?
The first step, before pursuing your QROPS transfer options is to check if you score for a QROPS. You are eligible to transfer your UK pension if:
- You are between the ages of 18 and 75
- Your pension has sufficient funds to generate the tax savings and interest5 to justify the setup expenses
- You are planning to reside overseas permanently or have retired abroad
- You have not purchased a plan
A State or British pension does not pass for transfer to a QROPS.
Contact A Specialist Financial Adviser
Your QROPS transfer next step is to find out if you might benefit from a QROPS. A reputable registered financial expert with knowledge of a particular jurisdiction and QROPS rules is in the position to give you advice specific to your individual needs and objectives.
Download Our QROPS Guide
Download our comprehensive QROPS guide for an understanding of all that you need to know about QROPS. The guide will reply to most of your questions. You can also call our specialist financial expert who will reply to your questions and offer professional advice on which QROPS jurisdiction and scheme to choose; based on your personal circumstances.
Start The Transfer
After selecting the jurisdiction and particular QROPS, the actual transfer is the most important of the QROPS transfer next steps. Having decided which QROPS scheme is for you, our reputable registered financial expert will arrange for your fund to be transferred from the UK pension scheme to your new QROPS. At this point, your financial expert will keep you updated on each phase of the transfer.
How Long Will It Take
There are two main determining factors that affect the length of the period it takes to transfer your UK pension to a QROPS pension scheme.
- The efficiency of your existing pension system in processing transfer requests
- The moment is taken by the new QROPS scheme to accept the capital
Normally, it takes about 2 months to complete the transfer, but it can take as little as 6 weeks for the transfer from an existing UK pension scheme to a QROPS.
Enjoy Your Retirement
Now that you have completed all the QROPS transfer next steps, you can relax and enjoy your retirement knowing that you are benefitting from all the advantages a QROPS investment offers. Our financial advisers are always available to address any concerns you might have regarding your new QROPS pension scheme.