Moving UK pensions overseas is popular because QROPS benefits are attractive in comparison to keeping a UK pension or SIPP and living overseas.
The latest official figures show QROPS investors save£1 million a day in taxes that would go to HM Revenue and Customs if the same money was left in a UK pension.
In the 24 months following April 6, 2006, 7,300 pensions were transferred from the UK in to QROPS.
Each has just under an average £140 a day to reinvest to swell the fund as the result of switching offshore.
That’s not the only plus side, so here is a quick guide to the benefits for anyone with UK pension rights intending to retire overseas:
QROPS give investors who want more financial flexibility a choice of stock markets, assets and commodities from across the world that are not open to UK pension savers. Some investments are still subject to HMRC rules, but the opportunities outweigh the restrictions
Investments can be made in most major currencies.
Pension benefits are paid gross in the currency selected by the pension holder. This takes away currency exchange rate fluctuation problems that can devalue spending power on a fixed income.
A QROPS does not have to reside in the same tax jurisdiction as the pension holder, so a QROPS can be based in a country where low taxes are beneficial to fund growth while the pension holder can live in any other country. The pension holder can move between countries without making further pension transfers.
Pension benefits are taxed as income in the country where the pension holder is resident for tax.
No annuity or ASP purchase
UK pension holders must buy an annuity or alternative secured pension (ASP) when they reach 75 years old or face an 82% tax charge on their fund. A QROPS does away with the annuity/ASP requirement.
Leaving a QROPS to family and loved ones
Combining the structure of a QROPS with no obligation to buy no annuity or ASP means the pension fund does not die when the holder dies. The entire remaining fund can be passed on to family or loved ones.
No Lifetime Allowance (LTA) charge
QROPS are exempt from LTA charges and any penalties from breaching the threshold.
QROPS are not suitable for every pension saver who lives outside the UK. Three factors to consider when planning a transfer are:
Coming back to the UK
If you transfer a UK pension in to a QROPS and then come back to live in the UK, the rules change and the pension may be liable to tax charges.
Transfer and administration costs
Moving a UK pension to a QROPS will incur fees and charges. For pension transfers of less than £30,000, these may be prohibitive and the benefits may not offset the cost.
Protected rights are additional benefits that some employer pensions offer. The loss of these rights may not offset the benefits of a QROPS.
If you have any doubts about the benefits or disadvantages of transferring a pension to a QROPS, contact us today to speak to one of our advisers, or you can request for one of our adviser to contact you – click here