What are the main features of a QROPS?

QROPS pension providers out there want your business. The market is highly competitive, so the discerning expat who is wondering what to do with their UK private pension can choose from hundreds of schemes. What do they have in common, and what sets them apart?

Favourable tax treatment

Strictly speaking, this factor is more down to the location of the QROPS, rather than the scheme itself. You also need to take into account the country of the investor’s residence, as you may be taxed highly there but have your QROPS in a low tax jurisdiction, or vice versa. In any event, most QROPS investors find themselves with a better tax scenario than they would had they left their pension behind in the UK.

The complexity of tax issues is one of the reasons why investors need careful and professional advice about any potential QROPS transfer.

An eye on diversification

The HMRC list that contains all of the approved QROPS has schemes from all over the world, in most established financial communities and some emerging ones. So you can get access to foreign markets, or rather those foreign markets will be more available as underlying pension markets (as UK pension funds may have access to them but may tend to be more UK focused – understandably).

Lump sums

QROPS are typically more flexible then UK pensions about permitting lump sum withdrawals. Not only might they have more flexibility about the amount of your pension that can be withdrawn, but also the number of times that you can make a lump sum deduction.

Inheritance aware

As with income tax, the inheritance tax treatment of the QROPS will depend on the treatment of the country in which the jurisdiction the QROPS is based. Some QROPS destinations are based in jurisdictions that have much more favourable IHT treatment than the United Kingdom. Investors do not normally choose their scheme for this reason alone, but it is a factor to be considered.