What QROPS Mean For Expats

Despite all the recent publicity about Qualifying Recognised Overseas Pensions Schemes (QROPS) many expats haven’t taken the opportunity to find out what they are, or, more importantly, exploit a really effective way to boost their retirement income.

What is QROPS?

Firstly, these are pension schemes which are not available in the UK – they are mainly found in offshore financial centres such as Gibraltar or Malta.

Many other countries also run QROPS but they must be vetted and approved by HM Revenue and Customs (HMRC).

Essentially, they have met tough criteria laid down by HMRC because they are a savings plan designed to pay a retirement income. The QROPS provider must tell HMRC how much you receive and they must ring fence 70% of the pension pot.

Can anyone move to a QROPS?

Most people moving their pension scheme from the UK to a QROPS are expats and international workers who have UK pension rights.

However, HMRC defines who an expat can be – currently this is someone who has broken all financial ties with the UK and now lives permanently overseas.

Expats working abroad but who have a home in the UK and are expecting to return in a year or two cannot move their pension under QROPS.

Why can’t all expats move their pension?

Break the rules and HMRC will impose hefty fines which start at 55% of your pension pot. HMRC also monitor that the QROPS is operating in accordance with its criteria and that people are not trying to mitigate their tax liabilities by using QROPS. Firms which help facilitate this, or don’t comply with QROPS rules, will find themselves barred from the approved list of providers.

What benefits will having a QROPS bring?

The benefits are potentially huge. The pension under QROPS is paid gross of tax and the income tax is paid at the rate in the country the expat is drawing their pension in.

The QROPS is also exempt from inheritance tax so the pension pot can be passed to family members.

Those providing QROPS can also invest in a wider range of investments than standard onshore UK pensions to help generate bigger returns

One of the big attractions is that on retirement you can withdraw 30% of the pot’s value, tax free.

How do I set up a QROPS?

You will need help from an independent financial advisor who specialises in QROPS. Find out what you pension is worth – you can pool several pensions together, and find a QROPS provider which is offering the best deal.