Switching your pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) is not as complicated as many people may try to make you believe.
QROPS have many tax and investment benefits for British expats, while HM Revenue & Customs (HMRC) has a habit of changing the rules without warning to exclude some retirement savers from taking advantage switching pensions offshore.
Now is always the best time to make the move for expats who are thinking seriously of transferring their UK pension overseas.
Moving pension pots in the UK offshore or updating an older QROPS to a newer, sleeker product involves a few straightforward steps.
- Do your preparation – ask all your current pension providers for a transfer value analysis – this is a statement that will give you the current value of your pension fund
- Check your tax residence – QROPS are only available to British expats or workers from overseas who have retirement savings in the UK. To prove you are non-resident for tax in the UK, go through the Statutory Residence Test rules to make sure you have broken your financial and social ties with the UK
- Talk to a QROPS professional – Lots of overseas IFAs claim they are QROPS professionals, but few really are. You need an international IFA working for a reputable company that can give whole-of-the-market advice.
It’s no good going to someone who has ties with a limited number of providers because you may miss the best product to match what you want from your financial future.
Your adviser should licensed to give pension and investment advice in the financial jurisdiction where you are tax resident – especially if you live in Australia where it is illegal to take pension advice from an offshore IFA or an adviser who is not authorised by the local regulator
- Short list your QROPS – Your adviser should offer a short list of suitable pensions that match your risk profile for investments and ties up any offshore tax issues between the UK, where you live and where your QROPS is based.
- Carry out your due diligence – The responsibility for ensuring the pension receiving your cash is a QROPS lies with you, so run checks on the provider with your IFA
- Sanction the QROPS transfer – Give the go-ahead and the transfer should happen within a few weeks.
The importance of getting tax residence, a professional QROPS adviser and carrying out due diligence cannot be stressed too much – get it wrong and you could face tax penalties starting at 55% of the transfer value of your pension.