UK Qualifying Recognised Overseas Pension Schemes (QROPS)
The British government legislated in 2006 that British nationals who retire overseas no longer had to leave their UK pension in the UK, and could instead transfer them into government approved QROPS schemes in a multitude of countries around the world.
Owing to the limited nature & high regulation of the UK pension industry, most individuals have limited options within their UK pensions which lead to the huge success of the QROPS industry across the world.
Some of the key drawbacks of a UK pension are outlined below.
Cannot touch until prevailing UK-retirement age
Can only take out up to 25% at retirement
May require the purchase of a UK annuity
Might be charged a penalty by either a life assurer to move your income (annuity) overseas or have a company pension paid abroad
Most importantly we believe a huge drawback of UK pensions is the lack of investment choice. If you do move into a QROPS scheme, you can invest in virtually any freely tradable securities in the world.
Practically speaking, for Brits planning to retire overseas QROPS transfers are an extremely logical decision. Still, before any potential transfer takes place, there are some important considerations.
Firstly, generally speaking the ongoing and setup costs make it only worthwhile for transfers of GBP75,000 or above.
What country do you open the QRPOS scheme in? There are other tax regimes, such as Australia, that will tax their permanent residents on the growth of their pension schemes both in Australia and the growth on any pension scheme held outside of Australia (including the UK).
The strategy of using a QROPS in a third country for receiving UK pension benefits can be useful for individuals in many circumstances. For example, the local regime of the migrant’s new country may not have a pension scheme that is approved as a QROPS by HMRC. Another example may be that the migrant’s new country of residence has high levels of taxes or low levels of investment growth in their schemes.
Currency considerations. What is the strength of the local currency of the QROPS in relation to the pound sterling? Would an immediate transfer to QROPS result in a loss of fund if the pound is weak against the local currency at that time? Can the QROPS hold money in pounds sterling?
Also, what flexibility does the QROPS product offer? There are many overseas schemes that, although registered as a QROPS with HMRC, are not aware of some of the finer details of the QROPS rules and their ongoing responsibilities in the Reporting Period.
Why not review your pension?
Currently Guernsey and the Isle of Man are by far the most commonly used centres for QROPS transfers. Because they are the most commonly used offshore centres, they offer the greatest choice, and from our research the best value for money. Please click here to receive a free review of your current arrangements.