Qualifying Recognised Overseas Pension Schemes (QROPS) allow those no longer living in the UK to transfer their pension into an overseas fund – and enjoy significant benefits.
These include taking far greater control of investments, and having the ability to pass on up to 100% of the fund to loved ones upon death (i.e. without paying the British death tax of up to 55%).
Yet by far the biggest attraction is the income tax breaks they offer.
Specifically, instead of losing large amounts of the fund due to UK taxes on pension income, an individual could pay significantly lower income tax via careful selection of the QROPS jurisdiction.
However, finance experts are warning expats to also consider the risks, and not become ‘blinded’ by these benefits.
Common pitfalls
Factors to consider if you want to transfer your pension include whether you are giving up any rights during the transfer, such as a guaranteed minimum pension or inflation-proofing, and if you face the risk of moving funds outside of value-guaranteed assets and then failing to receive what you invested.
In addition, QROPS are regulated by the jurisdiction where they are based, which means whilst the schemes themselves are recognised by HMRC, the advice may not be regulated by the Finical Conduct Authority – the UK’s main financial regulator.
Consequently overseas advice may not be as strict, and you could be misinformed in your choice of QROPS.
Historically individuals have been urged to make a transfer of a small pension fund into a QROPS designed to take larger amounts of money, and have even become victims of pension busting scams.
Pensioners are often targeted in this way because of the large sums of money involved.
Aside from the problem of unregulated advice, different countries often have regulations in place. Whilst many match the highest EU standards (for example, Malta and the Isle of Man), in the past non-compliant jurisdictions have been wiped off HM Revenue and Customs’ (HMRC) approved list to tighten up the system (i.e. Singapore).
If you are misadvised for whatever reason it can be expensive to rectify the mistake, which is why seeking professional, regulated help at the beginning of your transfer is of the upmost importance.
The language barrier
Different jurisdictions also create problems due to difficulties with communication.
If you transferred to a small scheme in Poland, for example, the scheme provider may not have the client services which a larger, international QROPS provider has – and therefore can not communicate with you in English.
This can lead to significant problems at all stages of a transfer.
What to do next
As outlined above, organising your personal finances when considering a move abroad can be a complex issue, so it is therefore vital to seek advice from professionals with an international standing like those at QROPS Group.
It is only by taking full stock of QROPS options with a regulated, independent financial adviser that will confirm if a transfer is the right option for you.
Contact us today to find out more
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