Advisors Worldwide

To start, we will clarify exactly what QROPS is. To generalize, anyone with a UK pension scheme who now lives abroad as an expatriate, or is planning to emigrate from the UK can now transfer their existing pension scheme into a Qualifying Recognised Overseas Pensions Scheme, or QROPS for short.

By moving your existing plans into a QROPS you can benefit from more favourable investment growth, greater flexibility and ultimately better management and performance.

With a QROPS it is even possible to even withdraw a lump sum upon transfer and you do not have to purchase an annuity. HMRC reporting requirements will cease 5 years after leaving the UK. Benefits can be withdrawn (subject to minimum age of 50) at anytime.

About QROPSThe 6th April 2006 saw some of the biggest changes made to UK pension regulations since the end of World War 2. The new reforms followed on from the Pensions and Finance Act of 2004 and allowed greater flexibility for UK citizens who were planning, or already undertaken, expatriate status. In what was to be known as 'Pension A-Day', the UK government planned to make pensions simpler to understand and encourage people to take control of their own pension provisions due to the spiraling life expectancy rate and the uncertainty of future governments to guarantee future pension contributions.

Beforehand, UK pensions were regarded as being littered with restrictions and regulations. This was partly done to protect the tax revenue generated for the UK government, but also to stop pensioners withdrawing all of their savings in the first few years of the plan and then becoming a financial burden to the state.

Once your pension schemes have been transferred into a QROPS and you have been non-resident in the UK for at least 5 years, then the overseas QROPS provider no longer has any obligation to report any withdrawals or payments you make to the HMRC. If the QROPS provider is in a country where payments from these schemes are more tax efficient then payments can be made to the policy holder without the deduction of any tax, however you may be liable for tax on the income, dependent on the tax laws in your new country of residence.

After you have been outside of the UK for at least five tax years, the QROPS pension fund becomes subject to the laws of the relevant overseas jurisdiction, and you are no longer required to purchase an annuity by age 75 or be faced with a massive 82% tax charge. The average UK minimum pension age is currently 50/55 before benefits can be withdrawn, however as QROPS offers significantly more flexibility it is possible to put your UK pensions into more favourable or desired financial avenues.

Benefits of QROPSThe features and benefits of QROPS can vary depending on your individual situation, however there are general benefits which are applicable to the majority of QROPS holders. Firstly, it is possible to avoid ever purchasing an annuity or paying a UK tax charge upon death.

There is also the advantage of having your pension actively managed by an Advisers Worldwide specialist, allowing greater freedom and flexibility in planning for your retirement. In owning a QROPS, you can be satisfied with the piece of mind in knowing that your pension is being made to work as hard for you as you are for it. Your adviser will be able to assist on drawing tax free lump sums, high fixed deposit rates and diversifying your portfolio through onshore and offshore funds. As well as allowing you to receive income and benefits in the currency of your choice, you also have the added value of superior confidentiality in your financial matters.

If structured correctly, you stand to gain greater control over your pension fund by taking advantage of being able to invest in a more diversified range of asset classes and take tax free benefits when you choose to do so.

But perhaps the most favourable advantage for some are the benefits that can be made in Inheritance Tax Planning (IHT). Upon death it is possible that your assets can be taxed at up to 40% before being passed onto your loved ones, however with a QROPS you are able to name beneficiaries who would receive the full value of your pension assets, excluding taxes altogether.

In some jurisdictions and under certain circumstances you may be able to take a large quota of your pensions value as a tax free lump sum, which some will use to put towards education planning or to deposit in high interest accounts.

CostsThe costs involved in a QROPS is relative to the amount you hold in the scheme. Generally speaking your pension fund needs to have a value of at least £75,000 to qualify for one of the higher end QROPS plans, however if you have other assets or cash deposits then it is possible to help with transfer values from £50,000 upwards.

FAQ - Email us your questions

Who can apply to transfer their pension into a QROPS?
Generally any nationality can apply for a QROPS scheme, however most schemes are not available to US citizens and can therefore be difficult to arrange for US nationals.

Can I arrange a QROPS myself?
No. QROPS providers only deal with pensions transfers on behalf of approved intermediaries.

What should I look for in a good QROPS?
Ideally you should be searching for a scheme that will offer you the highest levels of investor protection (i.e Guernsey) in a jurisdiction similar to the UK. Look for a provider who is transparent in their charging structure and that can offer schemes in the most tax efficient manner.

How long does a QROPS transfer take?
On average most transfers will take between 2-3 months from the time you request your advisor to gather details from your pension provider (e.g current benefits and transfer value).

What investment opportunities does a QROPS provide?
Firstly, there is no limit to the size of the funds that you can accumulate within your QROPS. As your new scheme is placed offshore it is open to a wide array of investment vehicles that could not be accessed under your old plan.

What freedom does QROPS allow?
In most circumstances you are able to manage the assets yourself or work with a financial adviser if you prefer. If you wish, you can also appoint an Advisers Worldwide specialist to make the decisions on your behalf and send you updates and recommendations should you not have the time to actively manage your investments.

When can I withdraw benefits from my QROPS?
Normally benefits can be taken from the scheme between the ages of 50 and 75, but dependent on your individual circumstances it is also possible to withdraw benefits before and after this age.

What is the minimum value I need to qualify for QROPS?
The costs involved in a QROPS is relative to the amount you hold in the scheme. Generally speaking your pension fund needs to have a value of at least £75,000 to qualify for one of the higher end QROPS plans, however if you have other assets or cash deposits then it is possible to help with transfer values from £50,000 upwards.

Do I still have to purchase an annuity?
No, although you may do so if you wish. QROPS removes the need for having to pay an annuity and means you are free to invest in other assets and can pass any remaining funds to beneficiaries upon your death.

How are any withdrawals or benefits taxed?
The level of taxation that you are subject to depends upon where you are a tax resident at the time, however most of the schemes that we recommend are subject to a zero or minimal rate of tax.

What will happen to my QROPS upon my death?
With the more sophisticated schemes, any funds remaining in the plan will be paid to those nominated as the beneficiaries.

When should I not transfer to a QROPS?
If you have guaranteed annuity rates that were set years ago when interest rates were much higher than they are currently, then you should consult an adviser to ensure if transferring into a QROPS would be beneficial to you.

Once I have transferred my UK pensions into a QROPS, can I withdraw my fund as a 100% lumpsum?
Technically, no. This is because any pension provisions that you have saved for are there to generate an income for you and your loved ones for the rest of your life. After 5 years offshore there are less restrictions on your scheme which allows you to be a lot more adventurous with your savings, however there may be serious tax implications depending on your new country of residence.

I have substantial pension savings, what implications could arise from a QROPS transfer?
If your fund is in excess of the lifetime allowance (£1.6 million as of 07/08 tax year) then it is recommended that you seek specialist advice. As a transfer to a QROPS will receive a benefit crystallisation and can give rise to a tax charge should your balance exceed the lifetime allowance assuming that your pension provider or you have not applied for "Enhanced protection". However, if enhanced protection has been granted then no tax charge will be levied assuming you have met the conditions required by this scheme.

Can I transfer the funds from my UK scheme or do I have to liquidate them into cash?
This is relative to your pension provider and the value of the assets that you hold with them. Generally speaking a transfer will be performed quicker if converted into cash.

Related Article: Download PDF - L&C Article on QROPS(July 2009)