QROPS stands for a ‘Qualifying Recognised Overseas Pension Scheme’.
To ‘Qualify’, the scheme has to meet HM Revenue and Customs rules to ensure that it should be properly and honestly managed and the provider has to provide HMRC with specific information. To be ‘Recognised’, the scheme must be run as a pension scheme, and regulated as such, in the jurisdiction where it is established. To be ‘Overseas’, the ‘Pension Scheme’ must be based outside the UK; and we would strongly recommend using well-regulated jurisdictions such as the Isle of Man and Malta.
A QROPS can be used by:
- someone with a UK pension pot that has already left the UK.
- someone with a UK pension pot that intends to leave the UK permanently.
- someone with a UK pension pot that intends to leave the UK for a very substantial period of time.
- someone who has worked in the UK as an expatriate worker who has now returned home.
A QROPS is a fund which can allow the following:
- 100% tax free withdrawal of the QROPS fund from the age of 55.
- Investment freedom (eg. Ethical and/or Shariah Compliant Funds)
- No restrictions on investment choices
- Much lower charges than UK Pensions
- Multi-currency options
- Potential for increased returns
- No need to buy an annuity
- Funds remain on death, tax-free for beneficiaries
- No UK Inheritance Tax
A QROPS can provide excellent retirement planning, providing the scheme does not break any of the UK tax authority’s (HMRC) strict rules and will enable you to actively participate in your pension plans, by offering you the ability to contribute additional funds, and personally select your underlying investment funds via the assistance of a financial advisor.
There are a few restrictions, such as:
- You cannot transfer your entitlement to a UK state pension into a QROPS.
- You cannot transfer your UK pension into a QROPS if it has already been used to buy an annuity.
If you meet the relevant criteria, transferring your pension plan into a QROPS can give much greater flexibilities in terms of how your ‘pension pot’ can be used. Once you turn 55 years of age you can access and withdraw up to 100% of the, then current value of the fund. This withdrawal is completely tax free which can be used in any way you so choose. You will not be liable for any UK tax on your QROPS assuming you remain non UK resident. With the Death Benefit, as you are not required to purchase an annuity, the funds will remain on death, meaning they are accessible by your beneficiaries (family, friends etc) with no Inheritance Tax.
It will be necessary for you to comply with the taxation legislation of the jurisdiction where you choose to be resident (or in some cases, a citizen); and specialist taxation advice would be recommended at the appropriate time if you have any doubts about the effect of the local legislation.
Do you want to receive more information or for us to arrange for you to speak to an adviser?
Click here to contact us / book a call and learn more about QROPS
and the advantages it can hold for you.