Have you retired abroad but kept your pension in the United Kingdom? If so, you may be needlessly paying too much tax.
For members of UK pension schemes who move abroad, a Qualifying Recognised Overseas Pension Scheme may be the answer to their problems. QROPS, as they are known for short, are overseas schemes that were introduced in 2006 which enable UK pension scheme members to transfer their pension assets free from UK tax.
A further advantage of QROPS is that they are exempt from UK inheritance tax.
There may be tax due on payments from a QROPS in the country in which you live. However given that the choice of where to put your QROPS is completely up to you, you are free to choose one in a country that treats pension payments favourably from a tax perspective.
Many people focus on the tax benefits of QROPS when they are thinking about getting one. And why not, when you have been paying tax for the whole of your life!
But there may also be other benefits involved in getting a QROPS.
Part of the criteria that an overseas scheme has to meet to get QROPS status involves being regulated as a pension in its own jurisdiction. However, this requirement does not necessarily mean that the pension needs to be identical to a UK pension. Accordingly, by choosing a QROPS from the 1,000 or so approved schemes on HMRC’s list, you may be able to find a scheme that offers what UK arrangements cannot.
For example, an advantage that a foreign scheme may offer over a UK one may be earlier access to larger lump sums – which may be useful if you want to get your hands on some money to put down a deposit on your new home abroad. There may also be a wider range of underlying assets that could be held by your scheme.
As always, getting any kind of financial product requires professional advice from someone that you can trust. Accordingly, you should seek the help of someone who is well versed in tax and overseas pension issues when you come to choose a QROPS.
