If you are considering transferring a UK pension into an offshore Qualifying Recognised Overseas Pension Scheme (QROPS) here are 10 tips to consider before making the switch.
- Financial experts have doubts about whether QROPS in some popular financial centres meet offshore pension rules following the introduction of pension freedoms on April 6, 2015.
This relates to local rules that allow pensions in some countries to pay benefits to retirement savers who are not yet 55 years old.
These include QROPS in Australia, Ireland and New Zealand, but may affect other financial centres as well
Switching funds to a QROPS in one of these countries may result in a tax penalty.
- QROPS in the European Union automatically qualify as viable pensions under the new rules
- Malta has already changed local pension regulations to match pension freedoms in the UK, but this does not mean all providers have enabled flexible access on their QROPS
- Take advice from a specialist QROPS adviser before committing to a transfer – IFAs who are regulated and work for a large firm are likely to have the skills and resources to give the best QROPS recommendations
- Compliance issues for some QROPS providers does not make QROPS a poor financial choice for retirement savers, they just have to take more care when selecting a provider that their pensions meet the new rules
- Pension transfers prior to April 6, 2015 remain unaffected – the scheme that qualified as QROPS up to that date self-certified the pension met HM Revenue & Customs (HMRC) rules so any cash in the fund should be safe provided proper due diligence was carried out
- Just because a pension is on the QROPS list does not mean HMRC has approved the scheme as compliant with UK pension rules – it means the scheme administrators certified that the scheme was a QROPS and HMRC can rescind that qualification at any time
- Switching to a QROPS is one way of allowing a pension fund to grow in excess of the lifetime allowance in the UK of £1.25 million. The fund transferred out will be tested to make sure the allowance is not breached, but once the money is in a QROPS, the allowance does not apply
- If the place where you intend to live has no QROPS provider, consider a third-party pension offered by a financial centre like Malta. A third party QROPS allows a retirement saver to live where they like while basing their pension elsewhere
- Watch out for transfers between QROPS – the same rules apply as if the transfer was leaving a UK pension fund