What is a QROPS?
QROPS or Qualifying Recognised Offshore Pension Schemes are a way for people who have built up a pension in the UK to transfer that pension offshore once they have left the country.
If you have already left the United Kingdom or intend to within the next 6 months this may be possible with most pensions. However, the pension you are looking to move should have a transfer value of over £25 000.
It is important that expats understand the many advantages of QROP schemes which enable paid up UK pensions to be transferred and accessed almost anywhere in the world including the USA.
Less Tax to Pay
These schemes are based in offshore jurisdictions so there could be extremely low or no tax to pay at all at source. In addition, there may be capital gains tax and inheritance tax advantages.
One of the vore benefits of transferring your UK pension into a QROPS is the increase in flexibility that you will enjoy.
Not only will you be able to choose, in conjunction with an Independent financial Advisor, a bespoke asset management strategy that suits your risk profile and financial goals but also be able to hold decide on a currency that meets your requirements.
With a QROPS there is also no requirement to purchase an annuity. With annuity rates becoming increasingly poor value for retirees the ability to keep hold on your asset and use income drawdown instead is attractive to many expats.
It is also possible for the asset to live on after your death and to be passed on to your heirs without them being liable for Inheritance Tax.
Higher Growth Potential
Your investments may be able to be held in an offshore portfolio bond which is a cost effective method for your IFA to buy into a wide range of investment options. Your pension will therefore be able to grow faster and generate a larger income in retirement.
Expats will also be able to add lump sums to bolster their pension pots as and when they choose to.
What are QROPS?
QROPS stands for a Qualifying Recognised Overseas Pension Scheme.
Introduced in April 2006, a QROP Scheme is an HMRC-recognised offshore pension scheme that allows non-UK residents to transfer their UK private/corporate pension offshore, tax free.
What is a pension transfer?
A pension transfer enables you to move your pension pot, from one pension scheme to another.
Who can apply for a QROPS?
You can apply for a QROPS pension transfer if you are between the ages of 18 to 75 and are currently living outside the UK, or intend to leave in the imminent future.
What if I am currently living in the UK, can I still apply?
UK citizens are free to apply for a QROPS; however you must show that you have a clear intention to leave the UK within the next year.
Is there a minimum amount of money I can transfer into a QROPS?
There is no strict rule regarding the amount of money you start a QROPS with, however research shows that a minimum of £25,000 is required to make a QROPS worthwhile.
Are QROPS available to people of all nationalities?
People from most nationalities are able to take out a QROPS.
Will HMRC still require reports?
With a QROPS you will still have reporting requirements to HMRC within the first 5 years. They will want to know about payments made and you may have to fill out a self-assessment return, however once have been a non-resident for over five years there will be no further requirements to report to HMRC, giving you greater freedom over your investment.
What happens if I return to the UK?
If you return to the UK for a short trip and your status remains as non-resident then your QROPS will stay as it is. However if you return to the UK to work then your QROPS will be subject to UK rules and regulations, despite the fact that it will remain offshore.
What if I have taken an annuity?
If you have already taken an annuity from your pension then you may NOT transfer your pension.
Is my UK state pension transferable?
No, QROPS are only applicable to private and corporate pensions.
What are the costs involved?
The cost of a QROPS varies over different schemes, jurisdictions and levels of service. Talk to an IFA for more specific information regarding the cost of a QROPS transfer.
What are the benefits of a transfer?
Offshore pension schemes come with many benefits including improved investment flexibility, access to global funds, currency flexibility, more confidentiality, substantial tax savings and more. These benefits will vary depending on your jurisdiction, but a basic summary can be found on our main QROPS and Pension Transfers page.
Which jurisdiction should I use?
Choosing a jurisdiction is entirely down to you, but ideally you will pick one that is economically and politically sound, has a favourable tax regime and gives good investment flexibility. An IFA can help you to establish the best jurisdiction for your particular needs.
How is it different to my UK pension?
A UK pension plan is restricted to certain types of investments, and has a lifetime allowance cap of £1.8million. With a UK pension you must purchase an annuity by the age of 75. An offshore scheme has no such restrictions.
So with a QROPS I don’t have to buy an annuity?
With a QROPS there is no requirement to purchase an annuity, however if you wish to purchase one this is entirely up to you and a QROPS will allow it.
What flexibility does a QROPS offer?
As opposed to a UK scheme, offshore pensions are classed as an asset and therefore can be passed onto your heirs. You may also withdraw money when needed and change your portfolio at will.
What happens if I move around the world?
Even if you move to a number of different countries, the QROPS will remain in the jurisdiction in which it was established.
Why might I choose not to transfer my pension?
In rare cases, some older pension plans may have high interest rate annuities; it may not be of benefit to transfer these.
What happens to my QROPS when I die?
Unlike a regular UK pension, upon your demise a QROPS will allow you to transfer all your remaining assets over to your named beneficiaries via a number of ways including the form of an annuity, immediate payments to named beneficiaries, fund distribution at a later date or payment of the remaining plan directly into your estate. Your succession instructions can be altered at any time.
How do I transfer my pension?
You should speak to an independent financial adviser about how to transfer your pension. They will advise you based on your specific requirements.
How can an IFA help me plan for my retirement?
An IFA will be able to give you advice on how to optimise your investments and work with you to establish goals that are in line with your own retirement plans, as well as helping you to manage risk within your investment portfolio.
QROPS Tax Implications
Moving your paid up UK pension into a Qualifying Recognised Offshore Pension Schemes can have positive tax implications. This can be understood as being split into three periods; the first five years after transfer, the next five years and after death.
The first five years
Moving a UK pension to a QROP Scheme will not incur a tax charge provided it is less that your lifetime allowance.
In the first five years withdrawals after retirement age is reached will not result in any tax charge provided no more than 25% has been taken as a lump sum.
The next five years
Depending on which jurisdiction the QROPS is situated in the tax implications could differ. Your IFA will be able to advise you on which jurisdiction would best suit your needs. In most cases there will be no tax to pay in this period.
Tax to be paid after death
One of the biggest benefits of utilising a Qualifying Recognised Offshore Pension Scheme is the ability to pass the pension on to your heirs after death. Depending on the individual position this may also be exempt from Inheritance Tax. Your IFA will be able to advise you on whther this is the case for you.