Getting a QROPS can be a great way to save you money and open up investment opportunities you might otherwise not have. But there are a few rules that need to be kept, to make sure that you do not incur the wrath of the UK taxman.
Choosing an approved QROPS
To qualify as a QROPS a foreign pension scheme must meet HRMC’s criteria of being taxed and regulated as a pension in its own country. It must also have been vetted by HMRC and approved as a QROPS.
Unfortunately, it is not open to investors to choose any pension scheme in a country that has been approved as a QROPS destination. If the scheme has not been individually approved by HMRC, is does not matter if it meets the other criteria – you may still risk a bill from the taxman.
The 5 year rule
Unless QROPS investors remain non-resident for at least 5 years following their pension transfer, they may risk losing the tax exemption the QROPS system gives them. This may not only mean a tax bill, but also a penalty.
Breaking the 5 year rule may be easier than you think because HMRC’s definition of residence is nebulous. Instead of being decided with reference to how long you spend in the country, it depends on where your “centre of gravity” is, which is a question that may be best left to a professional adviser.
Keep your finger on the pulse
Finally, just as QROPS can be added to the list at any time, they can also be taken off it. Accordingly, if your QROPS is removed from the list and your money is still in it, you could find yourself with your pension assets invested in a non-qualifying scheme. You could also find the taxman on your doorstep. If your QROPS adviser has their finger on the pulse they should be able to adviser you if there is any danger of this happening.