The HMRC QROPS Pension Scheme – How to Make it Work

The arrival of new UK tax legislation giving greater freedom for pensions, as well as the imminent onset of Brexit, has seen a rise in demand for QROPS pension schemes. Due to greater demand, they have become available and financially viable for much more people. With increased demand maintenance fees have lowered, which has opened the door for people with more modest pensions (less than 50,000 per year). Therefore, it has become possible for far more people to make the HMRC QROPS pension scheme work for them.

Make Sure it’s Qualified

QROPS stands for Qualified Recognised Overseas Pension Scheme. The key word here is qualified. Qualified schemes are officially recognised by the UK government as meeting certain criteria. That is, overseas pension schemes that offer at least equal to the UK’s consumer rights and protection. HM Revenue & Customs publish a list of countries with QROPS (updated every month) and any reputable advisor would only recommend these. The pensions on this list are regularly reviewed. If you want to avoid problems and make your QROPS work for you, transfer to a qualified scheme.

Sooner Rather than Later

Most UK citizens lose their right to tax relief once they have been tax resident overseas for five years. Although rare, there are exceptions to the rule, but they are exactly that, exceptions. It makes sense that anyone living overseas for a long time or planning to retire abroad, will have to think about transferring their pension at some point. If that’s you, and you’re reading this, now is probably the time – Brexit will change legislation and it is hard to predict exactly how. Many people are recognising this hence the upsurge in QROPS. Without a doubt, sooner is probably better than later.

Good Advice

Pensions and tax legislation are complex matters. As with most things complex, getting advice from an experienced professional is the best step forward. Commission payments vary and can be significant. Expect to pay for the initial setup of your QROPS as well as a yearly fee (deducted directly from your pension). Make sure you are aware of any potential risks, as well as benefits and commissions – Or you could end up facing nasty losses.

Who is Eligible

Technically, just about anyone with a UK pension is eligible to transfer to any country that is willing to accept that transfer. However, if that scheme is qualified tax will not be charged on the transfer. Hence, they are known as Qualified Recognised Overseas Pension Schemes (QROPS). Not all countries and schemes qualify. There are strict criteria to be met, relative to consumer rights and the rules set by UK law. Additionally, not all countries will accept transfers.

QROPS can certainly be the solution to your retirement abroad. There are risks involved so to ensure it really works for you, it is important to get good advice and be clear on your options.