Don’t panic if you are an expat who wants a Qualifying Recognised Overseas Pension Scheme (QROPS) but live in a country without a provider.
The United Nations lists 188 member nations – but the HM Revenue & Customs (HMRC) QROPS list has only 43 financial centres offering offshore pensions for expats and international workers from other countries who have UK pension rights.
Out of that list of 43 financial centres, many only make QROPS available to residents.
That does not mean if you live outside of one of these centres that you cannot take out a QROPS.
Several providers offer ‘third party’ QROPS.
Third party financial centres
These are offshore pensions that are hosted in a financial centre that allow the retirement saver to live in another country.
And residence in that other country does not have to be permanent. Expats can move around the world with confidence that their pension is safe and sound in the host country.
The only unbreakable rule is an expat cannot return to live in the UK as a tax resident and hold a QROPS at the same time.
Tax residence is the key to taking out a QROPS.
For example, a British expat who has retired and now lives permanently in Dubai cannot take out a QROPS in the United Arab Emirates as no providers operate there, but can transfer their onshore pension from the UK to somewhere like Malta, the Isle of Man or Gibraltar.
If the expat then moves to Oman or Saudi Arabia, the pension will safely sit in one of those ‘third party’ financial centres without any tax or financial implications.
Importance of tax residence
Any tax due on pension payments is due where the pension holder is tax resident, as the QROPS will pay out gross in many different major currencies.
The rules work the other way as well.
For instance, if someone from Singapore has accrued pension rights while working in the UK, they can switch their pension fund to a third party provider and return to Singapore to draw their pension benefits – or any other country for that matter – and any pension income is then subject to tax in Singapore, where they are now resident.
Any specialist QROPS adviser will help expats or international workers draw up a short list of the best offshore pension centre to tie in with their retirement saving goals and tax residence.
