QROPS Pensions explained

If you are an expatriate or are planning to live abroad, you have the advantage of being able to transfer your existing private pension into a QROPS pension. Rather than receiving your pension income from a UK scheme, QROPS pensions are based overseas, and are regulated by the Government of the country in which the QROPS scheme has been set up. This often gives you a tax advantage as many countries have lower tax rates than the UK.

It is also possible to set up a QROPS pension in a country other than the one in which you are living. Bear in mind, however, that you will have to pay tax in the country in which you are resident and may also have to pay tax in the country where the QROPS was established. The reason people usually set up QROPS in an alternative country is because the taxes there are particularly low, so they still gain overall.

To avoid double taxation it is important to marry the QROPS juridcistion with the country of residence.

QROPS stands for Qualifying Recognised Overseas Pensions Scheme. This means that the scheme should be recognised by the relevant tax authorities of the country in which it is established. It should also be approved by Her Majesty’s Revenue and Customs (HMRC) in the UK. HMRC publish a list of approved QROPS schemes, which you can view at the HMRC website. The QROPS list is updated regularly as more QROPS providers are added, and some are removed. If a QROPS pension provider is not on the QROPS HMRC list or has been removed, you could risk incurring large tax penalties from the UK government.

QROPS pensions are most suited to people who intend living abroad for at least five years, because prior to five years the QROPS providers have to report any pension withdrawals to HMRC. After five years this reporting is no longer required and you benefit from the full QROPS rules.

As well as benefitting from reduced taxation on your pension, QROPS have a number of other benefits. Amongst these is the fact that you don’t have to worry about fluctuating interest rates and are not subject to exchange rate charges if you are drawing your pension in the same currency as that used by the country where you are resident. Additionally, your dependants may not have to pay inheritance tax on any sums that you leave to them.

There are many other advantages of taking out a QROPS pension, which is why they are now becoming so popular. However, QROPS schemes are not suitable for everybody. QROPS pensions are a specialist field and it is essential to consult a qualified QROPS adviser who can give advice on schemes to suit you.