QROPS: what you need to know

Is your UK pension holding you back? This could be the case if you have retired overseas or you are considering doing so. Your pension may also be holding you back if you want to make investments in another country during your retirement. In terms of taxation and investment choice your UK pension will limit you. This is why a QROPS(Qualifying Recognised Overseas Pension Scheme) is the preferred choice for those that retire abroad.

A QROPS is essentially a recognised UK pension arrangement that is based overseas. Thus, if you are a holder of a registered pension scheme in the UK you will be able to transfer your proceeds straight into a QROPS. This is completely legitimate.A QROPS differs from a UK pension scheme because they must be recognised as a pension scheme under the legislation of the country where the scheme resides. These rules can of course be different to the rules in place in the UK.

What are the benefits of QROPS?

  • Pass 100 per cent onto your beneficiaries – You can be safe in the knowledge that once you have passed away any of the funds that are left in your QROPS will be left to your beneficiaries. Your beneficiaries will receive 100 per cent of your funds, as your QROPS is tax-free.
  • Minimise your currency exposure – If you have a UK pension you are only able to pay out in sterling currency, irrespective of where you live. However, with a QROPS you are not exposed to fluctuating exchange rates, as you are able to invest and pay out in the vast majority of currencies.
  • Up to 30 per cent tax-free lump sum – If you have a QROPS you will benefit from lump sum flexibility. The cash lump sum available on any UK pension fund tends to be limited at 25 per cent. You can add an extra five per cent onto this with a QROPS.
  • Avoid future UK government pension changes – HMRC’s regulations are continuously changing. It’s not easy to keep track of these changes. However, if you transfer your pension fund to a QROPS you won’t have to deal with any of the alterations that are made.
  • Income free of UK income tax – You will likely be able to reduce your income tax liability by a significant amount, as income tax is often higher in the UK when contrasted with other countries.This includes tax on pension income.

 Now you know all the reasons why a QROPS is beneficial for expats. It is vital to be aware of the fact that the proposed flexible pension rules in the UK may impact QROPS. It could lead to a change in the QROPS legislation that currently requires a minimum of 70 per cent of the fund to be used to provide income for life. New rules may lower this amount to ensure that the gap between the advantages of a QROPS over a UK registered pension scheme is still substantial.

If you require further guidance on QROPS or require a UK pension transfer, Taylor Brunswick Group can assist.