Making a decision on the best option of where to transfer your UK pension is a daunting task, and depends on your personal circumstances. 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 (QROPS) is, as the name suggests, an overseas pension scheme based outside the UK. This new form of pension plan was introduced in April 2006 by the British authorities to facilitate the ease of transfer from a UK pension to a fund in another country. Many British expats choose to take advantage of a QROPS transfer to safeguard their assets and maximise their retirement benefits.
The HMRC has removed many restrictions British expats abroad faced when wanting to transfer their UK pensions to the new country 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 plan and receive their pension without difficulty.
Is A QROPS for Me?
If you are considering becoming a resident in a foreign jurisdiction 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 foreign national who has worked in the UK for a number of years, and have now moved back to your country of origin there could benefits from transferring your UK pension to a QROPS in your current country of residence.
A QROPS allows British expats to legally transfer a UK pension to their country of residence, thereby taking advantage of the pension rules and tax benefits of that jurisdiction. A UK pension transfer gives you greater control over the management of your fund, allowing for increased investment flexibility. If you are approaching retirement and plan to move to another country 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 in an HMRC approved overseas pension scheme that is eligible to receive transfers from an authorised UK pension fund. A QROPS gives British expats the opportunity to invest in a pension fund 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 which allow a pension fund 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 favourable than those in the UK.
One of the important things about a QROPS is choosing the correct QROPS based on your circumstances. It is important to note that your assets transferred to a QROPS could be liable to certain taxes in your chosen jurisdiction. It is advisable to talk to a financial adviser regarding taxes and other charges.
It is essential that you understand the benefits, process and the consequences of forming a QROPS. You can contact 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 foreign jurisdiction then a UK pension transfer to a QROPS might just be the answer.
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 flexibility and control over your pension fund whilst receiving valuable tax benefits.
The following outline of QROPS eligibility criteria will help you understand if you qualify.
Who Can Apply?
Any British national 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 qualify for a QROPS. Foreigner employees who have worked in the United Kingdom and contributed to a pension fund and subsequently returned to their country of origin may also qualify 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 jurisdiction altogether.
- Must be between 18 and 75 years
- Should have a private pension scheme and NOT a British 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 foreign jurisdiction
If they intend emigrating to that country for employment or retirement
- You do not qualify for a QROPS if you have taken annuity
- If you have taken a lump sum benefit but not your lifetime annuity, you can qualify for a QROPS
QROPS provide British expats with an invaluable option for managing and growing their pension fund offshore. It is important to safeguard your investment and avoid taking unnecessary risks with your pension fund so it is advisable to contact an authorised financial adviser with specialist knowledge of the tax laws and legal requirements of a particular jurisdiction. Specialist financial advisers are in the best position to answer 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 assets are handled by a QROPS, such as liquidation of existing assets prior to transferring to a QROPS, purchasing a residential property with a QROPS and the transfer of assets to beneficiaries upon death. Here are some things you need to know about QROPS assets transfer:
Liquidation Of Assets
The structures and benefits of different QROPS vary and each one has its own conditions. When it comes to liquidation of assets prior to taking a QROPS scheme, again each QROPS assets 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 assets 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 United Kingdom
- Have you been a UK resident any time 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 any time during the last five (5) tax years then UK pension rules will apply to you and you will not be able to hold a property in the QROPS. After five (5) tax years, your QROPS pension scheme will be subject to legislation in the chosen jurisdiction, 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 assets are transferred to your named beneficiaries upon your death and, depending on the jurisdiction, given to them without paying any inheritance tax. It must be established that this tax relief benefit is available prior to investing the QROPS scheme.
Other QROPS Benefits
- An annuity to your spouse or dependants
- Assets grow 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)
- Assets 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 British expats the opportunity to transfer their UK pension to an HMRC approved offshore pension fund. Protecting and growing your assets within a QROPS makes the decision on which jurisdiction to transfer your UK pension to a daunting task, and depends on your personal circumstances. Specialist 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 assets.
I am a British expat 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 qualify 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 interest to justify the set up costs
- You are planning to reside overseas permanently or have retired abroad
- You have not purchased an annuity
A State or British government pension does not qualify 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 adviser with knowledge of a particular jurisdiction and QROPS rules is in the best 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 answer most of your questions. You can also contact our specialist financial adviser who will answer 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 adviser will arrange for your fund to be transferred from the UK pension scheme to your new QROPS. At this point your financial adviser will keep you updated on each phase of the transfer.
How Long Will It Take
There are two main determining factors which affect the length of time it takes to transfer your UK pension to a QROPS pension scheme.
- The efficiency of your existing pension system in processing transfer requests
- The time taken by the new QROPS scheme to accept the assets
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.