Understanding QROPS in five easy steps
by Alexander Beard, on Apr 7, 2014 11:52:04 AM
Step 1 - Know what QROPS stands for and what it means
QROPS stands for Qualifying Recognised Overseas Pension Scheme and it refers to overseas pension schemes which meet HMRC requirements to receive a payment from a UK registered pension scheme without the individual having to pay tax on the transfer. A QROPS should be broadly similar to a UK registered pension scheme.
Essentially, if you have a UK pension and are thinking of emigrating abroad then you might want to consider transferring your pension to a QROPS.
Step 2 - Know why you’d want to talk about QROPS
As per Step 1, if you are thinking of moving abroad, you may need to do something with your pension, rather than simply leaving it in the UK.
QROPS can offer an effective and tax efficient way to move savings, as their qualifying status means they are exempt from some of the charges that may be applied to other accounts.
Step 3 - Know the benefits of QROPS
A QROPS will allow your pension income to be paid without any UK income taxes being taken after five years of non-UK residency. Also on death, the residual fund can be left to any beneficiary without the 55% UK tax charge. Income can be paid during these first five but would be subject to UK income taxes.
You will only pay income tax on the pension in the country you live in after 5 years of non UK residency.
Because the QROPS does not necessarily have to be in the new country of residence, this can give a lot of flexibility and choice to the person moving their pension. The amount of income or lump sum you can draw from your QROPS will vary from one jurisdiction to another. A knowledgeable adviser can help you decide which is the best jurisdiction for your requirements.
Step 4 - Know that there are other options to QROPS
If you are moving abroad, then QROPS might not always be the best option for you. Whilst it is a common solution, there are alternatives available and, sometimes, these alternatives may be beneficial, depending on your personal circumstances.
What industry you worked in, what type of pension you have, how old you are and what country you are moving to all play a part in assessing the type of service you might require when moving your UK pension.
Step 5 - Know that it’s a good idea to talk your options through with an expert
The decision to emigrate abroad is a hugely exciting one, but you’ll probably also already realise by now that it comes with plenty of challenges.
One major challenge involves knowing what to do with your current finances and UK pension and taking professional and independent financial advice can help to put you in the right position to transfer your wealth in the most effective and efficient manner.
Alexander Beard are UK based, Financial Conduct Authority regulated overseas pension transfer specialists, with offices in several popular emigration destinations to help ease your emigration worries and ensure your wealth travels with you, wherever you go. Get in touch with us via the Contact Us page and we’ll be more than happy to have an initial chat.