A QROPS is an overseas pension scheme that meets certain requirements set by HMRC. A QROPS must have a beneficial owner and trustees, and it can receive transfers of UK Pension Benefits. QROPS came about as part of UK legislation launched on 6 April 2006 as a direct result of EU human rights directive for the freedom of movement of capital and labour. It is essentially a trust or a contract based offshore pension. As such the tax residence of the beneficial owner or beneficiaries is critical, as some countries do not recognise trusts.
A QROPS can be appropriate for UK citizens who have left the UK to emigrate permanently and intend to retire abroad having built up a UK pension fund. Alternatively, a person who is born outside the UK having built up benefits in a UK-registered pension scheme can move their pension offshore if they want to retire outside the UK. UK State Pensions cannot be transferred, but defined contribution, defined benefit pension schemes and SSAS can be transferred abroad. A QROPS does not have to be established in the country where one retires; rather, a person can move the pension to another jurisdiction and have the benefits paid into their country of choice. Moving to a QROPS could also be a good option for expats who are intending to return home but are approaching the lifetime allowance or have already gone over the lifetime allowance.
QROPS KEY POINTS
- As with other private pensions you can begin drawdown from the age of 55
- With a QROPS access is flexible meaning you can drawdown as much or as little as you like.
- QROPS typically offer a broader range of investment options and are not subject to the same restrictions most UK pensions are.
- Unlike defined benefit pensions that typically only have a limited inheritance amount for spouses, QROPS allows you to name any chosen beneficiary.
- QROPS allow you to hold and invest in multiple currencies. This can make them appealing to expats who will be retiring abroad and don’t want to be receiving their pension in pounds sterling.
- The benefits of a QROPS can vary depending on how long you have been offshore, intend to stay offshore and whether you remain offshore for a long or short period of time.
- A QROPS can allow you to take an enhanced tax free lump sum when you begin drawdown. This increases to 30% from 25%.
- Much like a SIPP, a QROPS can be used to consolidate multiple pensions.
- If you transfer into a QROPS and you live outside the EEA (European Economic Area) you will be subject to the ‘Overseas transfer charge’ – which is 25% of the value.
If you think a QROPS may be a good option for you and would like more information, speak to one of our advisers today.