Expats Flood QROPS Firms With Transfer Requests

A boom in the popularity of Qualifying Recognised Overseas Pension Schemes (QROPS) has seen some providers struggle to cope with demand.

Many of the firms are trying to recruit extra staff to deal with the soaring number of British expats and international workers with UK pension rights who are racing to move their pensions offshore.

The move follows HM Revenue and Customs (HMRC) shake-up of the rules last year that has stabilised the market and now QROPS providers in the Isle of Man, Gibraltar and Malta are leading the way.

The rush has seen one firm having to quadruple the number of staff from single figures to almost 40 to cope with the flood of applications.

The rule changes have seen QROPS offer a tax-effective and flexible option for British expats who are looking to move abroad when they retire.

Tax free pension cash

They have to live outside the UK for five full tax years to avoid a penalty charge from HMRC for taking their pension with them.

All QROPS schemes have to be officially recognised as being compliant by HMRC –and they are regularly checked to ensure they remain so.

Some jurisdictions allow for the QROPS holder to draw down up to 30% of their pension pot value – in most areas it’s 25% and HMRC stipulates that 70% of a pot is ring-fenced to provide the holder’s pension.

The pension is then either tax-free or the investor pays tax at the local rate rather than the UK income tax rate.

A spokesman for one provider in Malta that has seen a boost in business said: “Because of the sheer volume of requested transfers, expansion was essential and we have gone from a small team of less than 10 people to one of almost 40 staff.

QROPS for small pots

“We have also moved into larger offices to ensure we grow sufficiently to provide the service expected of us.”

Since the rule changes in April 2012, Malta has emerged as one of the market leaders for QROPS provision.

Now, around 2,500 QROPS schemes for investors to chose from in nearly 50 countries.

Most QROPS providers help those with pension pots of £100,000 or more but since the rule changes many providers are now offering ‘lite’ versions for clients transferring between £20,000 and £50,000.

These schemes are cheaper to set up, usually incurring lower set up fees and annual charges.