Switching a UK pension to an offshore Qualifying Recognised Overseas Pension Scheme (QROPS) is a relatively simple paperwork exercise, but involves a much bigger shift in thinking.
One of the issues that has shackled the QROPS industry is the hunt for short term gains.
QROPS are not about early access to pension funds or cash grabs. They are a long-term financial strategy for expats and international workers with UK pension rights.
When QROPS were set up in April 2006, the aim of the scheme was to let someone with a UK pension who lived permanently overseas have easier access to their pension fund on retirement.
A QROPS was a portable pension that could move around the world with a retirement saver.
Expats unaware of QROPS benefits
The problems came when certain providers and jurisdictions hosting QROPS started tinkering to exploit the rules in a constant game of cat-and-mouse with HM Revenue & Customs (HMRC).
This led to the ‘next generation’ rules in 2012, which saw hundreds of schemes close, mainly in Guernsey, the Isle of Man and New Zealand.
Since then, economically-troubled Cyprus and Slovakia have also lost their QROPS status, although the Slovakian provider Tatra Bank claims their absence from the market is temporary.
The problem for retirement savers is most are unaware that a QROPS may be the most suitable pension plan for their personal financial circumstances.
Also, the UK Financial Services Authority (FSA) has recently pointed out that many British-based IFAs are neglecting to include QROPS in their pension advice because they do not understand the rules and how they might benefit clients.
Who needs a QROPS?
So who are the retirement savers who ought to consider a QROPS?
The pensions are suitable for:
- Any former British taxpayer with UK pension rights – like a funds held by a UK pension provider. This includes international workers who were tax resident in the UK who contributed to a private pension.
- Any British retirement saver who may permanently move overseas to live
- Any British resident working overseas – although other onshore and offshore options may be a better option
- Any British taxpayer married to a non-UK national
Many retirement savers who could benefit from a QROPS fall through the advice crack because their UK financial adviser fails to consider an offshore pension as a financial strategy.
So, anyone falling in to the QROPS pension categories needs to seek out independent and professional advice from a regulated IFA experienced in QROPS transfers and offshore financial planning.
The IFA should have expert back-up from QROPS advisers specialising in cross-border tax and offshore investments as failing to consider the interaction between British and overseas tax laws can lead to an expensive mistake.