Here are some numbers about QROPS pensions that flesh out some of the myths and rumours circulating about expat retirement saving schemes.
According to the latest research, around £5 billion of pension assets have been shifted out of the UK by expats – with the figures for 2012-2013 are expected to reach around £1 billion.
That money represents 27,222 expat pensions moved to QROPS schemes since April 2006.
The average transfer is £183,674, although some providers accept much less – the issue is not so much how much pension is switched offshore by expats, but whether the costs of running the scheme are affordable for smaller pots.
The total market is around 5.5 million British expats and about 1.4 million international workers who have accumulated pension funds in Britain.
Chris Wright of QropsInvestor.com says, “these numbers are interesting, but remember that a large number of these expats may not have a personal pension to switch out of the UK”.
Starting a QROPS
Any ‘registered’ UK pension can be switched to a QROPS, but some older workplace pensions may have valuable benefits attached with a financial worth – like life cover, widow’s benefits and the like.
The figures come from QROPS research compiled by NewDawn Consultancy & Research.
The report says: “The cost of retiring in the UK is still driving retirement abroad and austerity, high tax and reduced incentives on retirement savings are driving a new wave of expats from the UK towards the emerging markets.
“These groups will continue to fuel the QROPS market in terms of populous and add to the existing 5.5 million British expatriates and 1.4 million foreigners now residing outside of the UK but who hold UK registered pension assets and collectively make up the QROPS market.”
More than 2,000 QROPS expat pensions are available in nearly 50 countries around the world.
Expats and international workers do not have to live in the country where their QROPS is based, which means they should need to transfer their pension just once wherever they live or work throughout their lifetime.
QROPS offer a range of benefits over leaving a dormant pension in the UK including:
- Tax effective investments
- Opportunities to invest in a wider range of commodities, markets and currencies
- Tighter control over currency exchange rate fluctuations as QROPS can pay benefits in most major currencies
- A larger tax-free lump sum on retirement. Typically a UK pension pays 25% of the fund, while many QROPS pay up to 30% of the transferred fund.
- No UK inheritance tax, so funds can be passed on without the UK’s 55% tax charge with appropriate estate planning
“The pension transfer market has been unaffected by the global economic downturn and this opportunity has clearly not gone unnoticed by the international IFA, as it provides access to a source of significant stored client wealth which had until 2006 not been accessible to this sector,” said Rex Cowley, who compiled the report.
What to know more about the basics of QROPS? Then read our dedicated page here: www.iexpats.com/qrops/
If you would like to be put in touch with a qualified financial adviser, please contact us via the contact form here for a referral.