QROPS offshore pensions can offer some great financial advantages to British expats and foreign workers who have saved into a pension in the UK before returning home.
But before signing on the dotted line, expats need to know the pros and cons of QROPs and if they are the right choice for their financial circumstances.
With that in mind, some of the essential points to understand are explained here:
What makes you an expat?
Many people get caught up in the bigger picture when deciding if they are an expat rather than look at the small details.
Expats are not resident for income tax in the UK.
It’s a matter of fact rather than opinion and is not only based on the time someone spends in the country but little points, such as if they have a driving licence, bank account or other ties with their former home.
A worker taking an overseas assignment for a year or two while keeping a home and links with the UK is unlikely to be considered an expat.
QROPS are only available to expats living permanently outside the UK, although some special rules apply to expats returning home.
Are you a foreign worker with UK pension savings?
If you fit this bill, you can transfer your UK pension savings to a QROPS, providing you have left the UK and are tax resident in another country – it doesn’t have to be the place where you were born.
What pensions can go into a QROPS?
Most pensions can be transferred to a QROPS regardless of whether they are workplace or personal, but some are banned from transfers.
These include the state pension and most public sector or civil service pensions. If you have worked in either of the latter roles, check with your provider to see if you can transfer out.
Does pension value matter?
Yes and no. QROPS come with no rule designating the fund size for a transfer, but the fees involved my rule out funds worth less than £100,000.
Some QROPS providers offer ‘lite’ pensions for smaller funds.
Transfers of £30,000 or more must come with a recommendation from an IFA or guidance service, such as Pension Wise. Few providers will accept a DB pension without proof advice 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.