What Is QROPS?

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QROPS are specialist offshore pensions for expats that come in a tax-effective package offering retirement options that are unavailable with a UK pension.

Transferring a pension to a QROPS entails a lot of careful planning and can be expensive if the complicated rules are not followed to the letter.

This guide answers some of the most frequently asked questions about QROPS.

What is a QROPS Pension?

QROPS is an acronym for Qualifying Recognised Overseas Pension Scheme which is a type of pension for UK pension holders now living overseas. QROPS has now been shortened by HM Revenue & Customs  to ROPS – a Recognised Overseas Pension Scheme.

Overseas and pension are straightforward, but recognised means the scheme administrators have certified the pension meets the requirements laid out by HMRC. Many of these rules are explained in greater detail below.

Confusingly, all QROPS are also ROPS, but not all ROPS are QROPS.

To confirm a pension is recognised by HMRC, check out the ROPS List, which is published online every two weeks or so, generally on the first and 15thof the month.

It’s OK to transfer money to a QROPS on the list, but moving money to an unlisted pension is likely to trigger a fine.

Not every QROPS is on the list as some opt for not to publicise their services.

What makes a pension a QROPS?

QROPS are like a UK self-invested personal pension (SIPP).

Typically, a retirement saver would transfer money from one or more UK pensions into a QROPS fund.

Once in the fund, the saver can choose how to invest the cash in a wide range of flexible investments, such as bonds, stocks and shares, gilts, currency and funds.

To comply with the rules, a QROPS must be:

  • Open to residents in the country where the scheme is based
  • Registered with that country’s tax authority as a pension scheme

The country where the scheme is based must have a system to tax personal income and give tax relief on pensions, giving tax relief on either:

  • Pension contributions
  • Payments out of the scheme

If your QROPS is in Australia, the scheme must comply with the rules for superannuation plans

The regulatory requirements test

The QROPS must be regulated by a pension scheme regulator in the country where the scheme is based.

If a regulator doesn’t exist in that country to supervise an occupational or non-occupational pension scheme, the scheme must be either:

Where the QROPS is a public service pension scheme set up or approved by the government of the country where it is based, the QROPS won’t need to meet this test.

The pension age and benefits tax relief tests

A QROPS can only make payments to members under 55 years old if they’ve retired because of ill-health.

If tax relief is available on pension payments, it must be given to everyone, not just non-residents of the country where the scheme is based.

As with the regulatory requirements test, these requirements are ignored if the scheme is a public service pension set up or approved by the government where it is based.

Other requirements for a QROPS

The scheme must be based in either:

  • Outside the UK in an EU member state, Norway, Iceland, Liechtenstein, or a country (except New Zealand) that has a double taxation agreement with the UK which includes clauses for non-discrimination and the exchange of information
  • A country or territory that has a double taxation agreement with the UK that provides for the exchange of information
  • A country or territory with which the UK has a tax information exchange agreement (TIEA)

If a QROPS is based in Guernsey, it can’t be open to Guernsey non-residents and be an exempt pension contract or trust under section 157E of the Income Tax (Guernsey) Law 1975.

International organisations

For QROPS run by an international organisation, such as the EU or UN, the pension must:

  • Provide benefits for service to that organisation by its employees
  • Established in one of the following:
  • An EU member state other than the UK
  • Norway, Liechtenstein or Iceland
  • A country or territory with which the UK has a tax information exchange agreement (TIEA)

or a double taxation agreement that covers the exchange of information

Does HMRC approve QROPS?

No. HMRC clearly states that QROPS administrators self-certify that their schemes are compliant with ROPS rules and that they are not vetted by HMRC.

That means it’s up to the retirement saver to carry out due diligence on their preferred QROPS to make sure the scheme complies with the necessary rules. In practise, that involves making the transfer through a professional independent financial adviser.

How many QROPS are there?

The last QROPS List had more than 1,500 schemes listed in 28 countries.

Can expats transfer their UK pensions to a QROPS after leaving the UK?

Yes, although some strict rules govern where an expat must live to benefit from a QROPS.

Retirement savers can also transfer funds between QROPS, subject to HMRC rules.

Will QROPS accept workplace pension transfers?

Yes. Expats can transfer a workplace pension to a QROPS and in many cases, opt for early access under the same pension freedoms as apply in the UK, such as drawing money from the age of 55 years old.

Can expats switch public or civil service pensions to QROPS?

No. Public funded pensions pots cannot be moved to a QROPS.

Public-funded pensions have a value based on length of service and final salary, not on the amount accumulated in the fund.  Most public sector and civil service pensions would fall into this category, such as those for teachers, NHS staff, the armed forces, council workers and police.

Can the state pension move into a QROPS?

No. The state pension cannot be accessed through a QROPS.

QROPS to QROPS transfers

The same rules apply to QROP-to-QROPS transfers as UK pension-to-QROPS transfers.

Can I have a QROPS in the UK?

No, QROPS are for expats living  abroad full-time, not those spending part of the year out of the country.

Tax rules align QROPS benefits with those of UK pensions, so it’s unlikely anyone would gain a financial advantage from holding their retirement savings in a QROPS while living in the UK.

Up-to-date details of where QROPS are currently available is included in the HMRC list, although providers can offer pensions in other countries if they meet the qualifying rules.

Does pension value matter for QROPS transfers?

Yes and no. There’s no rule saying what a fund size should be, but the fees involved may not make a transfer cost-effective for smaller funds.

Some QROPS providers get around this by offering cheaper ‘lite’ pensions for smaller funds.

Transfers of £30,000 or more must come with a recommendation from an IFA or guidance service, such as the free Pension Wise.  Few providers will accept a direct benefit pension transfer without proof advice from an IFA has been taken.

Many expats may find tracking down a suitably qualified IFA difficult, especially as the UK regulator, the Financial Advice Service has made the rules for writing off pension transfers stricter.

Download the Free Pension Transfer Guide

Expat Pension Transfers Guide

iExpats.com expert writers have created a simple guide to Expat Pension Transfers just for you.

Find out how you could save tax, increase growth and investment opportunities with this simple, no-nonsense guide that will introduce QROPS, SIPPs and QNUPS options and talk through the pros and cons. Download the free guide by following the link below

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