Despite the other reasons you may find to get a QROPS, the main attraction has to be its tax advantages.
Before QROPS were “invented” in 2006, a British expat had to keep their pension in the UK and hand over at least 25% per year of their withdrawals in tax. So when Qualifying Recognised Overseas Pension Schemes were introduced in that year, there was some excitement among the British expat community.
It’s true that people do not generally get excited about financial products and retirement planning. However, being able to transfer your pension to a foreign scheme and legally deprive the Treasury of a cut of your hard earned pension was, and still it, something to get excited about.
There are of course a few terms and conditions to abide by. For instance, the QROPS investor has to leave the country for at least 5 years following the transfer for the tax exemption to hold. Otherwise, they may have to meet a very large tax bill.
Of course, visits back to the United Kingdom during that time are allowed, but an expat needs to be careful not to get sucked into UK residency again. If you are at all in doubt, it is best to take professional advice on your residency.
Once you have a QROPS, your actual tax bill depends on where the scheme is based, and on where you live. So if, for example, you choose a QROPS in France or Spain, you may find that your tax bill is higher than if you choose a scheme based in Guernsey or the Isle of Man.
You may also find that the inheritance tax treatment of your pension may depend on where the scheme is based. So a QROPS in an older, traditional European country may be caught within its IHT rules.
However, all of these things are issues that a QROPS adviser should take into account, and discuss with you when you make your final decision.
