Benefits
If you are genuinely considering retiring abroad, there a number of significant advantages to taking your pension with you, compared to leaving it in the UK. Below you will find a brief summary of the generic benefits to moving your pension in to a QROPS, however we would always advise that you discuss these in detail with one of our qualified advisers;
• With a QROPs, there is no requirement to ever purchase an annuity with your pension fund, income can be drawn down directly from the pension pot.
• Security – Once in a QROPS the pension is now your asset, which means you relinquish the exposure to an underfunded UK scheme and have total control
• You have complete flexibility to leave your pension fund to your family in your will, and all of your unused pension fund will pass to your beneficiaries free of UK tax at source• You can have as much or as little input in the investment strategy as you like, crucially there is complete transparency so you can feel comfortable knowing exactly where your money is. Do you know how your current pension funds are being managed?
• You can take out a lump sum from your pension fund on retirement tax free, of up to 30% (depending on the QROPs scheme).
What is a qrops scheme?
QROPS stands for Qualifying Recognised Overseas Pension Scheme and allows individuals to
transfer their UK accrued pension into another jurisdiction when they retire abroad.UK pensions have traditionally been frozen when the holder retires overseas with no access to their money. This changed in April 2006, which is known as A-Day, when HMRC changed regulations surrounding pensions enabling holders to transfer their substantial funds to another country when they retire to a different jurisdiction.
Qualifying schemes
It is absolutely crucial that you ensure the scheme you are considering has “qualified status”, otherwise you will leave yourself open to a substantial tax penalty. For a scheme to be qualifying it must operate under similar pension laws compared with the UK and therefore be legally recognised by the HMRC;
• It must be recognised by HMRC for tax purposes – therefore, it must be open to residents
of the country where it is based where there are stable taxation laws in place.
• The maximum lump sum taken should not exceed 25% of the total pension fund, however if you have been offshore for more than 5 years, some qrops schemes allow this figure to rise up to 30%.
• To draw your pension you must be at least 50, or 55 from April 2010
• The QROPS must report back to the HMRC for a reporting period of five years
In essence, a QROPs is any pension plan which is recognised as fulfilling certain criteria as laid down by the HMRC. The QROPS structure then allows anyone who either lives abroad, or intends shortly to live permanently outside of the UK, whether for work, or to retire, to transfer their UK pensions into an offshore pension plan, and to avail themselves of several key advantages
Qualifying criteria
Originally to be able to transfer your UK accrued pension to a QROPS scheme in another jurisdiction you must be between the ages of 18 and 75 and have a substantial pension of at least £50,000 to transfer. However recently there has been the introduction of baby qrops that are more simplistic but allow the transfer of pensions with a minimum value of £25,000
You must also be planning to be overseas permanently or living in the country you have retired to for 5 years ormore.
