Have you heard people talking about how brilliant their QROPS are? If you are a British expat, the chances are that you know someone who has managed to take their UK pension out of the UK without paying any UK tax. So how have they done it, and what are the pros and cons?
The basics
QROPS stands for Qualifying Recognised Overseas Pension Scheme. Introduced in 2006 as part of the government’s Pension Simplification initiative, they give members of UK pension schemes the chance to free their pensions from the UK taxman.
QROPS are available for the transfer of UK private pensions only – it is not possible to transfer your state pension entitlement.
When a QROPS adviser decides whether an investor is an appropriate candidate for a QROPS he looks at:
- whether the investor’s current scheme will allow a transfer; and
- whether it is a good idea from an investment perspective.
Your QROPS adviser will look at the rules of your current scheme’s rules in detail to ascertain your current provider’s policies on pension transfers. If you have already started to take benefits from the scheme, you may find that a transfer may not be allowed.
QROPS are available in so many countries around the world that, if your UK scheme is a defined benefits one, your adviser should be able to find an international arrangement that can at least match its investment potential.
However, if your current UK scheme is a final salary one, it could be difficult to find a solution with a guaranteed income to match that level. In which case, a QROPS may not be the answer for you.
Are there any other advantages to QROPS?
The main benefits to QROPS are their tax advantages, because you can free yourself from the obligation to pay at least 20% of your hard earned pension to the taxman. However, in the process of looking for a QROPS, you may find that you can select a scheme that gives you far greater flexibility than you had in your UK scheme regarding the availability of lump sums.
