There is much speculation about QROPS in the newspapers and on the internet. Some QROPS providers seem to promise the earth, so here are the facts.
Introduced in 2006 under the last government’s Pension Simplification initiative, Qualified Recognised Overseas Pension Schemes offer members of UK schemes the chance to move their pension assets overseas, without paying UK income tax.
Why was this allowed? It does seem counter-intuitive that the taxman should allow you to take your pension out of his tax net. However, it does mean that expats can get their hands on their pensions without paying tax to a country that they have long since left behind.
You will be subject to the tax regime of the place where your QROPS is located, but a competent financial adviser should be able to point you in the direction of a QROPS location that does not tax pensions heavily.
There are of course hoops to be gone through if you want to get a QROPS. However, with appropriate advice, these are not too burdensome.
Your adviser should first verify that you qualify for a QROPS. If your UK scheme is not yet in payment, and you are going to be a UK non-resident for at least 5 years after the proposed transfer, then you probably meet the conditions.
Having established that you are a suitable QROPS candidate the next thing to decide is which scheme to choose.
HMRC approved schemes on the basis that they are taxed and regulated as pensions in their own country. But rather than restricting that approval to schemes that resemble a UK pension, you may find that HMRC have given their stamp to a range of over a thousand schemes in a variety of countries, from Australia to Ireland.
Most of the approved schemes are on a list HMRC publishes on its website, although some remain confidential. HMRC approval does not mean that the taxman has vetted the scheme or that it is tipped as a good investment – your financial adviser will have to make those enquiries and recommendations for you.
Once you have settled on a QROPS the transfer should take around 6 weeks to complete. In the meantime, you can look forward to a retirement as an expat without paying UK tax!
