There are many different QROPS jurisdictions around the world, offering varying benefits and restrictions for those wishing to transfer their UK pension into an overseas scheme.
In order to qualify, the QROPS – or Qualified Recognised Overseas Pension Scheme – must be regulated by a suitable body in the country within which it’s established.
Alternatively, if there is no body by which it could be regulated, but the scheme is registered in Norway, Iceland, Liechtenstein or a European Union member state, it may still qualify under QROPS legislation.
So exactly how do the regulations work to protect your pension? And how can you, as an individual who may benefit from a QROPS transfer, ensure that your QROPS is in safe hands?
The specifics
If you have a UK pension, your pension is regulated by the Financial Conduct Authority. After your pension is transferred into a QROPS and a period of time elapses, you pension will be regulated by the governing body in that jurisdiction.
A scheme becomes a QROPS by contacting Her Majesty’s Revenue and Customs (HMRC) stating that the scheme meets all regulations laid down in the legislation. HMRC then sends a letter confirming the decision and gives the scheme manager a unique QROPS reference number.
Three of the most important conditions which must be met include the necessity of the scheme to be open to members of that jurisdiction, that at least 70% of the pension will be kept for pension income (i.e. a maximum of 30% can be given as a lump sum), and pension benefits cannot be taken before the 55th birthday.
Regulation nations
There are many different jurisdictions in which a QROPS can be based, and in jurisdictions with an established financial presence, such as the Isle of Man or Malta, the QROPS and wider pensions market is overseen and moderated by respected local regulators.
Malta in particular has a long-standing reputation as a QROPS provider due to the country’s industry-leading financial regulator, the Malta Financial Services Authority (MFSA). Additionally, the MFSA worked with HMRC to make sure its registered pension schemes complied with the UK requirements for QROPS, making the jurisdiction especially secure.
These kind of factors – i.e. jurisdictions with a commendable financial record, strict regulatory practices and a focus on QROPS compatibility with their local laws – make attractive and safe options for QROPS jurisdictions.
Taking control of your transfer
Sometimes certain schemes – and even entire QROPS jurisdictions – have been found to not comply with QROPS rules, and been delisted by HMRC. Inexperienced or unscrupulous advisors could also transfer your pension into a fund which is not compliant with QROPS legislation, which could lead to an unauthorised transfer charge by HMRC.
This is why it is imperative you connect with a regulated QROPS expert experienced in international transfers who can perform the necessary due diligence and ensure the safety of your pension.
Your independent financial advisor (IFA) should be able to confidently recommended you a QROPS which suits your circumstances (including details on the size of your pension, your future plans, and any special requirements), and outline the regulations in place protecting your fund.
To be put in touch with a regulated IFA, please use our contact form.
Not sure that the 70% ‘rule’ mentioned above is correct.
Here is an extract from HMRC’s QROPS rules. The key word is “OR”……
be established in a country or territory with which the UK has a Double Taxation Agreement that contains exchange of information and non-discrimination provisions – see the list in RPSM14101046 (there is more information on the provisions of particular Double Taxation Agreements in the Double Taxation Relief Manual), or
satisfy the requirement that, at the time of the recognised transfer, the rules of the scheme provide that:
at least 70% of the funds transferred will be designated by the scheme manager for the purpose of providing the member with an income for life,
is Guerney a QROPS-approved country?