QROPS stands for Qualifying Recognised Overseas Pension Scheme. It is a pension fund based abroad (outside of the UK) that is approved by HMRC to receive a transfer of funds from a UK-based pension.
Why would I benefit from a QROPS?
There are a number of benefits associated with the transfer of a UK pension abroad. These will often depend on your own personal circumstances, which is why we always recommend asking for professional advice before making any decisions. If you are moving abroad, however, an overseas pension provide more advantageous benefits than in the UK, where regulations can be more restrictive.
Choosing the right QROPS
There are around 1,500 officially recognised overseas pension schemes on the HMRC website and many more approved schemes that are not on the list. Not all of these will be suitable for you, so it’s important to consider the following when selecting a QROPS.
- Your retirement plans and goals – when and where would you like to have access to your savings?
- Are there beneficiaries to consider (such as a spouse, children or a family member)?
- What level of risk are you willing to take with your investments?
- Are there any exchange rate implications upon transfer or in retirement?
- What are the tax implications in the country or jurisdiction that you are living in?
Are there any limitations when moving funds to a QROPS?
However, there are still specific regulations in the UK that you must consider when transferring a pension. For instance, if you are UK resident or have been a non-Uk resident for less than five complete UK tax years, the benefits that you receive from your overseas scheme must not exceed the benefits you would get from a UK pension.
Will I be penalised for improper management of my QROPS?
Any offshore or overseas pensions registered as a QROPS must comply with the legislation outlined by HMRC. Trustees or administrators of a QROPS have an obligation to ensure payments made to you in transfers are within the UK limits and are reported to HMRC for 10 years from the date of transfer in. This can change, so it’s important to continually stay up to date with new rules and requirements.
It’s important to note the following:
- There is a tax charge payable by a UK pension scheme holder on the excess of any UK pension funds transferred overseas over the UK lifetime allowance
- If the pension holder accesses the pension benefits or funds before the age of 55 an unauthorised payments charge will apply
- The QROPS must report any transfer made to another scheme within the required period
- Unauthorised payment, made by the QROPS, will be charged at 40% of the fund’s value, with an additional surcharge of 15% which must be paid by the pension holder
- An overseas pension that continuously fails to follow the QROPS rules could have its QROPS status removed and be banned from receiving UK pension transfers
To ensure you follow the correct procedures and adhere to the UK’s strict rules and regulations regarding a transfer to a global QROPS, we recommend you get expert advice. To get in touch with one of our qualified UK pensions experts, click here.