Have you heard of the acronym QROPS? It stands for Qualifying Recognised Overseas Pension Scheme and these are the schemes most people are now referring to when they generalise and talk about offshore pensions or overseas pensions. They are an exceptionally advantageous solution for many expatriates who are living and working abroad, and can be even more attractive for those planning their retirement overseas…
However, the products are not widely known about, well promoted or overly used by those – like you – who could potentially benefit from them greatly. Despite being backed by the British government as legitimate international pension schemes and offering retirees a whole host of exceptional benefits such as the ability to bypass the requirement for the purchase of an annuity in retirement, QROPS are not being researched and considered by enough qualifying individuals.
Therefore today, we’re going to be giving you the QROPS advice you must read if you value your pension! We will outline the highly advantageous benefits available to those for whom QROPS are suitable, we will make it clear why QROPS are ideal for some expats and would-be overseas retirees, and ultimately, we will give you the one piece of advice you must read if you value your pension and your retirement prospects!
What Are QROPS?
As stated, the acronym QROPS stands for Qualifying Recognised Overseas Pension Schemes, and these are pensions that the British government and HMRC have deemed potentially suitable for expatriates who are living, working and paying tax outside of the UK. When you are no longer tax resident in Britain, you lose the right to receive tax relief of any British pension contributions – therefore QROPS can come in to play at this point. Whilst you still don’t receive tax relief on contributions to them, there are many other benefits that suit many international individuals.
What You Must Know About QROPS
QROPS are pension schemes set up outside the UK that have to be regulated as pensions schemes in the country in which they are established. They have to be recognised for tax purposes in the country in which they are established. That said, a QROP scheme may however, whilst still complying with the above, be established in a country that taxes pensions but at a minimal rate or even at 0%.
Remember, in order to be an eligible scheme, the QROPS must be fully approved by HMRC in the UK.
An individual, for whom it is deemed advantageous and beneficial, can transfer their existing onshore schemes into a QROP scheme. This may suit expats who have recently moved to live and work abroad for the long-term and who were previously saving into an onshore pension and enjoying tax relief. It can also suit those who know they will remain abroad into their retirement.
What Are The Benefits Attributed to QROPS
If you retire abroad and are drawing a UK based pension, that income will remain subject to UK income tax unless you’re living in a country with a double tax treaty with the UK that contains legislation specifically about pensions. If you reside in a country with no double tax treaty with the UK, you may even be subject to a higher tax rate than the top rate of tax in your new country of residence. This is naturally far from ideal – however, if you have your pension under a QROP scheme, if tax is due on your pension income, it is only due in your new country of residence. Naturally, if you’re planning on retiring to a low tax country or one that does not tax pension income, you could potentially enjoy your entire retirement income free of tax.
A QROPS can remove the requirement on you to purchase an annuity with your pension pot or pay a UK tax charge on death. This can mean that you can leave all your unspent pension fund to your beneficiaries – free of tax at source. In addition to this, throughout the life of your pension you have much greater investment freedom. You can take a tax-free lump sum, even if you have already taken 25% from your pension. And if you’re interested in what we said about investment freedom, you’ll be please to learn that you can access both onshore and offshore funds, the highest fixed deposit rates and enjoy total diversification with this type of retirement savings scheme.
You can ultimately take income from your pension in a much more tax efficient way and take all the income and the benefits in the currency of your choice – which is very important for those retiring abroad to another nation where they perhaps use a different currency to the one you have been saving in. Finally, depending on the jurisdiction in which you invest in your chosen QROPS, you may be able to gain protection against possible future creditors – and you may be able to gain greater confidentiality when it comes to the management of your money.
What’s The One Piece of Advice You Must Read if You Value Your Pension and Your Retirement Prospects?
QROPS advice and overseas pension planning are highly specialised areas of financial planning. You therefore have to take appropriate professional advice that covers both your present nation’s legislation and offerings as well as the legislation and tax situation in your intended nation/s of residence. In the past there have been international scandals about the mis-selling of pensions – HMRC and the British government are adamant this will not happen again. Therefore, before you take any action that will affect your pension income or retirement savings in any way you absolutely have to have professional, qualified, expert advice.
This article does not constitute advice – because advice has to be given by qualified advisers and be pertinent to the individual seeking advice. However, if you would like to know more about QROPS, the companies we recommend, or you would like to find an adviser with whom you can speak about your own situation and opportunities, please contact us today.