Qualifying Recognised Overseas Pension Schemes (QROPS) are growing in popularity with around 10,000 expats a year switching their UK pension pots into the schemes, according to HM Revenue & Customs.
The choice of QROPS is vast – with more than 3,000 separate QROPS offered in 46 different countries worldwide.
Finding the right QROPS is important – so for someone considering a transfer, here are some answers to frequently asked questions:
What is a QROPS?
A QROPS is an offshore pension plan for UK non-residents with pension funds still in the country.
Who can take out a QROPS?
The schemes are for British expats living permanently overseas and residents of other countries who may have built up a pension fund in the UK while living or working in the country in the past.
Why consider a QROPS?
Retirement savers consider QROPS as a better option than leaving a pension in a UK fund for lots of reasons depending on their personal financial circumstances, for instance:
- Moving a QROPS offshore removes the fund from future pension rule changes in the UK
- QROPS can pay a larger tax-free lump sum than UK pensions
- Investors can access extra markets, commodities and currencies unavailable in the UK
- QROPS payments can be made in most major currencies, side-stepping currency exchange rate fluctuations
Are QROPS tax-free pensions?
Yes and no. No tax is paid in the UK on fund growth or payments. However, some income tax on benefits may be due in the country where you become tax resident.
How much is a QROPS tax-free lump sum?
This varies between providers, but can be up to 30% of the fund size, compared with a maximum 25% in the UK.
Where’s the best place to base a QROPS?
Most QROPS are customised to a retirement saver’s personal financial circumstances rather than pigeon-holing them into a specific product or provider, so different places are appropriate for different savers.
Popular jurisdictions at the moment include Gibraltar, Malta and the Isle of Man.
Can I self-manage a QROPS?
Yes. Providers offer managed or self-managed funds. Generally, QROPS investors work with an IFA to manage their QROPS, although they do not have to.
Can I move between countries with a QROPS?
Definitely, the only restriction is you cannot be a UK resident. Many retirement savers have a ‘third party’ QROPS based in one country while they live in another.
What are the restrictions of fund sizes?
QROPS rules do not dictate any maximum or minimum fund size, but some retirement savers with small pots may find the charges involved with a transfer are not cost-effective. To try to work around this problem, some providers have introduced QROPS ‘lite’ schemes.