QROPS (Qualifying Recognised Overseas Pensions Schemes) are a great way for you to enjoy tax breaks and have greater control of your pension fund if you are planning to retire overseas, compared to leaving your funds in the UK. And most importantly, they’re backed by Her Majesty’s Revenue and Customs (HMRC).
In this quick article you will discover what QROPS are, the benefits they bring you and potential problems to look out for.
How QROPS work
First, a QROPS gets set up and registered in a country other than the UK by the provider. Then, once they’ve had approval from HMRC that they’re operating under the agreed QROPS guidelines, they’ll be allowed to run it under the tax laws of the country where they’re registered, and not by the tax laws in the UK.
This means that any pension funds that are transferred into the QROPS from the UK can switch from being liable to UK taxes laws and instead be liable to the laws where the QROPS is based.
As long as the QROPS is registered in a country with lower taxes and restrictions than the UK, any pensions transferred into it will get these benefits too.
The main benefits of QROPS
Here’s a quick overview of the main benefits you can enjoy when transferring your UK pension into a QROPS when retiring overseas:
· Your payments and withdrawals will be taxed at the lower tax rate of where the QROPS is registered, rather than at the UK tax rate.
· You can have greater choice and control over how your fund is managed and invested
· You can choose to get your currency paid in other currencies
· Should you pass away and still have funds in your pension pot, these can be passed to you heir and they won’t have to pay UK taxes on them
· The QROPS you choose does not have to be based in the country you plan to retire to, so you have a greater choice of options
Transferring your pension into a QROPS
The first job of transferring your UK pension into a QROPS is to pick the best QROPS for your situation and future plans. For this it is important to consult an independent advisor with experience in transferring pensions overseas, so they can advise you to use one that is proven and trustworthy, and help the transfer itself run smoothly.
The next job is then to prepare your UK pension fund for the transfer. Usually your financial advisor will help you liquidate all your associated assets before the transfer. This can help it happen more quickly.
Once this process is started it normally takes about eight to twelve weeks.
However, for the first five years that your fund is transferred into your QROPS you will still be liable for UK taxes. This is one of the conditions that HMRC imposes on QROPS as part of their agreement. Once this five-year period has finished your fund will stop being under the jurisdiction of UK taxes and laws and instead come under the tax laws of the country where your QROPS is registered for the rest of its term.
The problems with QROPS
One major problem with QROPS, and perhaps the main reason why you should always seek advice before doing anything, is that HMRC can choose to revoke their support, if they feel that the terms of their agreement has been breached in any way.
If this happens then the QROPS and any of your funds transferred to it can lose their exemption from UK tax laws, and even start facing penalties for having been transferred out of the UK in the first place.
Conclusion on QROPS
QROPS can provide a great benefit to you if you plan to retire overseas. Compared to leaving your pension in the UK they can bring you greater savings and better control, so you can better enjoy your time in retirement.
However, as with all big financial choices, it always pays to ask questions and get advice first so everything has more chance of success and properly meets your expectations and situation.
Author Bio
This article was provided by Expat Pension Providers Ltd,, a leading provider of independent financial advice on QROPS.
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