Discover if transferring your British based pensions to a HMRC listed QROPS could be right for you…
In April 2006 it became possible for British expatriates to move their British based private and occupational pensions to a UK HMRC listed QROPS, and benefit from all the associated advantages that such a scheme can provide.
QROPS is an acronym that stands for qualifying recognised overseas pension scheme. These are pensions that the British government and HM Revenue and Customs have deemed appropriate and acceptable vehicles for expatriates to utilise. Therefore if you’re living, working or retired outside the UK, you can in theory transfer your British pension into such a QROP scheme.
The reasons for potentially doing so are manifold. For instance, when you’re no longer tax resident in the UK you lose the right to receive tax relief on any British pension contributions that you make. Clearly this makes many onshore pensions less suitable for expats. It’s usually at this point that QROPS become very attractive solutions for those who are living abroad and still working – and especially for those who have retired or who are planning to retire abroad.
If you’re potentially interested in transferring your pension, you are strongly advised not to move it to a QROPS until you have left the UK. There are significant potential tax advantages available to doing the transfer in this order.
What You Need To Know About QROPS
QROPS are pension schemes set up outside the UK that have to be regulated as pension schemes in the country in which they are established. They also have to be recognised for tax purposes in the country in which they are established. That said, a QROP scheme may however, whilst still complying with the above rules, be established in a country that taxes pensions at a minimal rate, or even at 0% in some circumstances.
In order to be an eligible scheme, the QROPS must be on the HMRC list in the UK.
An individual, for whom it is deemed advantageous and beneficial, can transfer their existing UK pension schemes (apart from their State pension) into a QROPS structure. This may suit expats who have recently moved to live and work abroad for the long-term, and who were previously saving into a UK pension and enjoying tax relief for example. It can also suit those who know they will move or remain abroad into their retirement, or those who are already retired abroad but not yet receiving an income from their pension.
What Are The Benefits Of QROPS?
If you retire abroad and are drawing a UK based pension, the income you receive will remain subject to UK income tax unless you’re living in a country with a double tax treaty with the UK that contains legislation specifically about pensions.
If you reside in a country with no double tax treaty with the UK, you may even be subject to a higher tax rate on your pension than the top rate of tax in the UK. This is naturally far from ideal – however, if you transfer your UK pension to a QROPS, if tax is due on your pension income it is only due in your new country of residence.
Naturally, if you’re planning on retiring to a low tax country or one that does not tax pension income, you could potentially enjoy your entire retirement income free of tax – imagine how much further your income will take you in retirement if it is taxed less.
A QROPS also removes the requirement on you to purchase an annuity with your pension pot, or to pay a UK tax charge on death. This can mean that you can leave your entire unspent pension fund to your beneficiaries – free of inheritance tax. In addition to this, throughout the life of your pension you have much greater investment freedom with a QROPS.
You can also take a tax-free lump sum, and you can access both onshore and offshore funds as well as the highest fixed deposit rates, and enjoy total diversification with this type of retirement savings scheme.
Finally, depending on the jurisdiction in which you choose your QROPS, you may be able to gain protection against possible future creditors – and you may be able to gain greater confidentiality when it comes to the management of your money.
QROPS are clearly highly beneficial to many people, and the question has been asked ‘will QROPS remain this attractive forever?’ The answer is no one knows how future legislation changes may affect QROPS, but the fact is that right now QROPS are proving to be of massive significant benefit to many British expatriates. So whilst the window of opportunity for you is well and truly open right now, you owe it to your retirement income’s potential to explore whether a QROPS could be the right thing for your pension.
Remember that once your pension is transferred out of the UK, it will no longer be affected by the ever-changing UK pension laws.
Secure A Better Retirement Abroad With Our Free Personal QROPS Pensions Analysis Service
To receive your personalised and free UK pension vs. QROPS analysis and comparison report, produced by a fully qualified pensions expert, complete the form on the left hand side. You can specify exactly how you would like to be contacted. You have nothing to lose and a potentially much wealthier and secure retirement to gain.