QROPS or Qualifying Recognised Overseas Pension Schemes is a form of a pension scheme which meets the requirements set out HM Revenue and Customs (HMRC). Those who have undertaken a QROPS receive the transfer of their UK pension through a variety of privately administered person pension plans, without incurring certain payment and sanction charges.
The qualifying QROPS need to act exactly the same as a UK pension for those who have been a UK resident for five previous tax years. Additionally, those who currently have QROPS and want to return to the UK will need to take note that their pension will once again be subject to regulations of UK pensions. In the following brief, we will detail everything you need to know about UK pensions and QROPS to help you decide if the scheme is right for you. You can find out more at this link: Pensions explained.
Will QROPS be right for you?
In the bigger scheme of things, Brittish expats really only have two options for managing their pensions:
• Retain your UK pensions through a UK provider
• Transfer your pension to a QROPS
While there are other options available, they will generally always come back to these two choices. QROPS hold the ability to unlock a vast number of benefits including the ability to avoid taxation.
Who is eligible for QROPS?
There are generally two main scenarios for those who qualify for QROPS:
• UK residents who have built up a pension in the UK and who now wish to retire abroad
• Non-UK residents who have spent a significant amount of time working in the UK and who have built up pension benefits through a UK pension scheme, who now wish to return home.
One of the key things you will need to remember is that QROPS does not have to be established in your new country for the scheme to kick in. This means that you will have almost instant access to greater flexibility and scheme stability through the plan. In order for a pension scheme to be able to qualify as a QROPS, the scheme will need to apply to HMRC and be approved.
What are the benefits of QROPS?
There are a great number of benefits to using a QROPS. One of the main benefits of the scheme is the tax benefits. When a person receives a pension income in the UK, that income is taxed. This tax is collected as a withholding tax and is set at around 20%. This applied to everyone who received a UK pension whether they are living in the country or not. Through a QROPS the beneficiary stops paying this tax after five years.
Another great advantage of a QROPS is that the scheme allows for payments in other currencies and this has proved to be a valuable safeguard for all expats who have invested in a QROPS. Undoubtedly one of the most popular reasons why more and more people are choosing QROPS is the freedom of choice that the scheme gives to retires. This freedom is given to beneficiaries in their choice of investments.
