UK Pensions
What is QROPS?
Created in 2006 to simplify the pensions system, a QROPS (Qualifying Recognised Overseas Pension Scheme) is a pension transfer scheme that is based in a jurisdiction outside of the UK but is recognised by HMRC. It also follows the same standards or equivalent as a UK pension.
Most expat UK pensions can easily be transferred into a QROPS, as long as the overseas scheme is registered with HMRC and is fully compliant with the standards of the jurisdiction it is domiciled in.
How are QROPS structured?
• There is a master trust set up which appoints a corporate trustee (the QROPS provider) and their powers, roles and responsibilities in terms of administering the QROPS.
• The trustee must be based outside the UK for the scheme to be considered as a QROPS.
• There are usually wide investment powers allowing flexibility for the trustee to invest in a wide range of assets – for example cash, bond, property, hedge, equity and commodity funds.
• The trustee of the QROPS holds these investments on the member’s behalf and has investment powers. They will often appoint an investment manager to switch investments on their behalf as market conditions change.
• The trustee would also be responsible for making payments of benefits from the QROPS to the member.
Is there a limit?
There is no minimum level according to the regulations, but generally, the total of all of your eligible schemes should amount to a minimum of £40,000, for QROPS to be cost effective.
However, you may be eligible to take your pension as a lump sum (no QROPS required) if your pension is worth £10,000 or less, or, your total pension pots under all the schemes you belong to are worth £30,000 or less.
ADVANTAGES OF QROPS: IF YOU RETIRE OVERSEAS
- Once inside QROPS, your pension is ring fenced from changes in UK law
- You can accumulate tax-free growth
- No UK tax on pension
- On commencement of your pension, you can receive an increased lump sum of 30% as opposed to 25%
- No 55% tax on death
- Liberation from Lifetime Allowance Charge
- Wider currency choice (less currency risk)
- Wider investment choice
ADVANTAGES OF QROPS: RETIRING BACK TO UK
- No UK tax on pension until return to UK
- Reduced UK tax on pension: only 90% taxable
- Increased Lump Sum: you can still take 30% before return to UK if you’re aged 55+
- Lifetime allowance crystallisation-transfer. When value < lifetime allowance; takes lifetime allowance out of equation thereafter.
- No 25% / 55% lifetime allowance tax charge post-transfer, no matter how large the QROPS becomes
RSS Feeds
