If you have a UK pension fund and are planning to live permanently abroad during your retirement a QROPS scheme is (literally) made for you. QROPS are Qualifying Recognised Overseas Pension Schemes. That is, they are overseas pension schemes that are considered legitimate enough in the eyes of HMRC to manage your pension pot. For those who want to retire abroad this means they have options – Options are always good, so long as you know what they are!
Certain UK pension pots are not eligible for QROPS and cannot be transferred. This includes,
- A pension that has been used to purchase lifetime annuity.
- Pensions where payments have previously been made through a “Final Salary Scheme” (annuity).
- UK State Pensions
SIPPs, SSAS and most defined UK benefit pension schemes can be transferred.
An important thing to note is that having a QROPS will not affect any entitlement you might have to a UK state pension.
UK pensions can be restrictive. QROPS are more flexible and offer up more options. A QROPS allows you to withdraw money how and when you want it. For example, you can choose to receive a higher income during early retirement and less later on when you really start to slow down. It is also possible to take out a lump sum, as much as you need.
Almost invariably QROPS can provide more options than UK pensions with regards to how your pension pot is invested. You will discover a flexible and extensive choice of funds available, able to suit different situations, goals and time-planning. Unlike guaranteed annuity there are some elements of risk with investment pensions. How much risk you are willing to take is also relative to the options available to you – Although of course, professional management will usually minimise risk.
What Countries & Pensions Qualify?
HMRC (who introduced this new scheme on April 6th 2006) has strict criteria that must be met for a foreign pension to qualify. Not all countries and all foreign pension schemes are eligible. In addition, transfer penalties as well as taxation depends on the country. However, it is not essential to transfer to a QROPS in the same country you retire.
The HMRC has a list of QROPS and the latest PDF can be downloaded HERE.
Get the Best QROPS for You
There is a myriad of options available using QROPS for UK pension holders who intend to retire abroad. Some countries do not recognise trusts (such as the USA and France), which can make taxation a difficult hurdle to manoeuvre. Without doubt, pensions and QROPS are a complex matter but many ex-pats have found them more than worthwhile. Even so, making the wrong move could cost you heftily. That is why it is absolutely essential to find out all the options and get the best advice by visiting a QROPS help centre and speaking with a professional pension advisor.