QROPS Uncertainty May Impact Millions Of Expats

Lisa Smith, BA (Hons), CeFA

Pension planning rules should offer certainty for expats – but Brexit and sudden QROPS tax changes are doing anything but that.

The risk is the overseas transfer charge may be extended to all QROPS once the Brexit negotiations end.

The tax is essentially an exit charge for expats moving a pension overseas.

But not everyone pays – the main exemption is for expats moving to a European Economic Area (EEA) country.

If they transfer a UK onshore pension fund or existing QROPS into a QROPS either based in an EEA country, no tax is due.

Transfer tax loophole may close

HMRC is keeping the reason for the exemption close to their chest, but the general opinion is the measure avoids breaching freedom of moving capital around Europe.

The concern is that from March 2019, this loophole will close as Britain is no longer a member of the European Union and that all QROPS transfers will face the exit charge.

This should be a worry for the hundreds of thousands of expats who want to retire to France, Spain or Ireland – the top destinations for Brits abroad.

The repercussions would also impact hundreds of thousands more expats from Europe in the UK who would like to take their pensions with them when they return home.

For those with some time left before they wish to retire, the spectre of the transfer charge is not a problem.

What’s the best expat pension?

Expats closer to retirement have more of a concern. Playing a waiting game to see how the transfer charge pans out could leave them in last-minute dilemma about transferring to a QROPS.

Some financial advice firms offer a UK SIPP as a solution.

The structure of these self-managed schemes is like that of a QROPS.

The transfer charge does not apply to UK onshore pensions, but expats may find this are not as tax-effective as a QROPS.

A SIPP does not offer tax relief to expats, although many other benefits are the same.

The uncertainty affects around 900,000 British expats living in the EU – with 308,000 in Spain, 250,000 in France and 190,000 in Ireland.

According to the Office of National Statistics, around 3.3 million EU expats live in Britain.

Whatever the future for QROPS is a big deal for a vast number of people.

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