For those planning to live or retire in Switzerland, the option of transferring a UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS) has become an increasingly pertinent aspect of financial planning.
Switzerland is home to 50,000 British expatriates, with a large percentage employed in top-tier jobs with some of the largest global organisations. Switzerland attracts some of the most established talent the UK has to offer, and the continuing trend, according to the growing number of QROPS providers in the country, is that they are tending to bring their sizeable pension pots with them.
There are now over 120 schemes operational in Switzerland which are able to accept a UK pension transfer and place it in a fund offering more flexibility, investment options, tax benefits and the potential for early retirement.
But for many residing in Switzerland, the preferred jurisdiction is Malta. Maltese QROPS are actually popular throughout Europe, the Middle East and particularly America due to the Double Taxation Treaty they have in place with an extended number of countries, the stable nature of the economy and the high performance of existing funds.
So for British expatriates, there are a few options to consider before committing to the transfer. In general, Swiss providers tend to place the majority of funds into a relatively stringent annuity fund. This offers far less flexibility and control than is available in Malta, and as many Swiss-based expatriates are involved in the world of finance, having control over investment choices is the preferred way to go.
By transferring a UK pension into QROPS, expatriates can benefit from:
- No UK tax on drawdown, lower tax rate depending on jurisdiction
- No exposure to currency fluctuations
- Portability (depending on provider)
- Succession planning
- Up to 30% lump sum tax-free upon retirement
- Extended investment options
- Early retirement
QROPS have seen their popularity increase in the last three years as the grey clouds gather above the UK pension market. Too much uncertainty and an overwhelming number of legislative amendments exist in the UK for most, and with the confirmation recently that the UK retirement age extension is to be fast-tracked (although the official announcement is likely to be made in mid-November), plus the likelihood that all pension schemes could eventually become locked into the deficit-laden UK for good – in a similar fashion to that of the public sector defined benefit schemes – it’s been a particularly busy time for QROPS providers.
It is vital to note that while living in Switzerland, a QROPS transfer should only be committed to if the intention is to live permanently outside the UK.