If you’re planning to live abroad then it’s important that you get the best pension plan for your situation.

Qualifying Recognised Overseas Pension Schemes (or QROPS for short) are a type of pension scheme — approved by HM Revenue and Customs — designed especially for people in your situation.

After five years of setting up your QROPS, transferring your pension fund and becoming non-resident in the UK, you will then be free from certain taxes and regulations that govern UK based pension schemes, saving you money and giving you more control.

But as with all things of a fiscal nature, they can seem complicated at first. This article will hopefully show you the basics in plain English, so you get off to the best start in finding the best overseas pension scheme for you.

The main benefits of QROPS

• •    You can make withdrawals and payments to your pension fund at a lower rate of tax and free from any UK regulations
• •    You can get your income in the local currency
• •    UK tax is not payable on your fund in the event of your death; all unused funds go to your beneficiary
• •    You can choose to manage your own pension fund or work with an advisor

How QROPS avoid UK taxes and regulations

As mentioned above, QROPS are HM Revenue and Customs recognised schemes that allow you to enjoy your pension fund abroad, free of UK taxes and regulations.

They do this because the company that provides the QROPS is allowed to be registered outside of the UK. This means that they bound by the tax laws of the country they are registered in and not the UK’s laws.

By choosing to register in a country that has lower taxes and more flexible regulations, they can then offer you their QROPS with these lower taxes and more flexible regulations. (It’s also worth mentioning that you do not have to pick a QROPS registered in the country you plan to live in. You’re free to pick and choose wherever you plan to live.)

How QROPS work

For the first five years of setting up your QROPS and becoming non-resident in the UK, the company providing your QROPS are still required to notify HM Revenues and Customs of any withdrawals or deposits you make.

However, once that five-year period has been reached, you’re then free from HM Revenues and Customs, and then only bound by the lower tax laws and more flexible regulations of the country where your QROPS is registered, plus any local taxes in your country of residence.

Transferring your pension fund into a QROPS

Once you’ve given your financial advisor the power to assess and deal with your pension fund, transferring to your QROPS should take about two to three months.

The usual method is to liquidate your current UK pension fund before the transfer, as it makes everything go much quicker and smoother.

The benefits of your QROPS will then kick in after you’ve served the five year grace period as described before.

And in the event of your death

Morbid as it is to mention this, with a QROPS, in the event of your death and there being funds remaining, those funds are free of any UK taxes, so it means that your beneficiaries will receive everything remaining in your fund.

The downsides of QROPS

So far you can see that QROPS really seem like a great option for your pension if you plan to live abroad, however you still need to be careful.

The big catch with QROPS is that they have to be approved by HM Revenue and Customs, which means that this approval can be revoked if HM Revenue and Customs feels that the company providing the QROPS stray outside of their guidelines.

If this should happen to your QROPS provider then your pension fund will lose its immunity from UK laws and regulations and be liable for any fines associated with the transferring of your pension fund.

The only real way to minimise this risk is to always use an independent financial advisor who can recommend only trusted and proven QROPS providers.

Conclusion

If you’re planning to live abroad then a QROPS is one of the best options for making your existing UK pension fund work harder for you. You will pay less tax and get much more flexibility in how you manage it.

You just need to make sure you go through an independent financial advisor so you use a reputable and proven QROPS provider.

Share