QROPS are generally good news for many expats as they offer tax and investment benefits that are not available to retirement savers who leave their pensions in the UK.
But QROPS transfers are not available to millions of retirement savers with money held in many workplace schemes that are under threat from underfunding by employers.
The Financial Conduct Authority (FCA) takes the view that gold-plated workplace pensions are unsuitable to transfer to a QROPS.
That is the advice starting point because the FCA considers that workplace schemes often offer guarantees and features that are irreplaceable in a QROPS.
These cover a range of features, such as guaranteed annuity rates that are far above today’s market rates and payments to widows on children.
Pensions fail to deliver
You know if you have one of these pensions as they are called ‘defined benefit’ or ‘final salary’ schemes.
Most employers have closed their final salary schemes because they are so expensive to provide.
Recently, the attitude towards moving a final salary scheme to a QROPS has softened.
With the collapse of British Home Stores and the government bid to rescue Tata Steel by changing workplace pension scheme rules to offer reduced benefits, expat retirement savers can argue their contracts will fail to deliver.
Arguments to support this include pointing out that if the pension fund generates an income of more than £32,761 a year, even if the government’s lifeboat agency the Pension Protection Fund steps in, any benefits over this amount are at risk due to funding caps.
Public sector ban
Another point to make is the scheme’s death benefits are dependent on the expats membership status. As a deferred member without a spouse or children, you cannot pass on the balance of a large fund to a beneficiary on your death.
Expats who have public sector or civil service pensions have even less of a choice about transferring their pension to a QROPS.
The public sector includes the National Health Service, councils, police and Armed Forces, but also extends to government agencies and organisations.
Specific rules stop the transfer of these pensions to a QROPS.
The State Pension is also prohibited from transfer to a QROPS.