Despite being part of the previous government’s Pension Simplification initiative, the legislation and guidance notes about QROPS run to many pages of technical jargon. So what are QROPS, and what is all the fuss about?
QROPS stands for Qualifying Recognised Overseas Pension Schemes. Introduced in 2006, thousands of UK pension scheme members have taken advantage of them to mitigate their tax bills.
Let’s break that acronym down and see what it means.
Qualifying
Foreign pension schemes may qualify as QROPS if they are taxed and regulated as pensions in their own country. Don’t let that “taxed” part put you off – it simply means that the scheme must be treated as a pension for tax purposes in the jurisdiction where it is based. So you could find a QROPS in a country that does not tax pensions very highly.
Recognised
It is not enough for an overseas scheme to meet these criteria. HMRC has to have inspected a scheme’s individual details and recognised its credentials. HMRC does keep a list on its website of most of the recognised foreign schemes, but there are also some that are kept confidential and stay off-list. If you are invited to join any of these, do make sure that your adviser checks the scheme’s credentials with HMRC.
Overseas
QROPS cannot be based in the UK. Neither, for that matter, can their investors for the 5 years following the transfer of the pension scheme. Accordingly, you may wish to check that your plans are consistent with getting a QROPS before you go ahead and move your pension assets. The consequences of getting this wrong may include a visit from the taxman waving a large bill.
Pension Schemes
Just because a QROPS has to be regulated as a pension scheme in its own land, it does not mean that you are restricted to “plain vanilla” schemes when making your choice. In the UK we may have the excitement of SIPPs, but if you look around the approved QROPS destinations you may find a variety of more appealing structures and underlying pension assets available.
