QROPS (Qualifying Recognised Overseas Pension Schemes) have seen growth year-on-year since their inception, and now more than ever the popularity of the scheme seems to have become more prevalent, due to the Budget reforms scheduled for 2015. But according to recent figures, an awful lot of expatriates with UK-based pensions still haven’t made a transfer.
Over 300,000 British expats per year are deciding to leave their home shores and take up residency elsewhere. The Office of National Statistics states that they believe over four million British-born expats now live permanently abroad. Of these expats, roughly 45% have a UK pension, and of this number it is estimated that a staggering 34% are electing to keep their money in the uncertain landscape of the UK pension market.
Since 2006, the options to take all accrued savings out of the UK upon leaving has been taken up by the vast majority of pension holders, however there are still those who remain in the deficit-laden UK pension pot.
The research – which was carried out by HSBC- does not give any clues as to the reasons for over a third of expats with UK pensions failing thus far to take advantage of QROPS, but one potential reason for this is perhaps a lack of knowledge and insight into the benefits such a transfer would offer.
There are many advantages which a QROPS provides to those who have built up a UK pension pot and now work overseas.
- Non-exposure to currency fluctuations (especially useful in light of a weakening pound). QROPS payments and lump sums are transferred directly into the savers local account in a large range of currencies.
- QROPS can offer a tax-free lump sum withdrawal as large as 30% of the entire fund.
- More options for investment across almost every asset class available.
- Protected funds which cannot be accessed or used in divorce settlements, or for the collection of inheritance tax.
Switching to QROPS
Figures suggest that over 10,000 expatriates are transferring into QROPS each year currently, although this is set to increase based on the first two quarters of 2014. There are in excess of 3,500 schemes available held in 42 jurisdiction worldwide.
It is widely acknowledged by financial commentators that most expats with a UK pension would benefit from switching to a QROPS, although the scheme is most certainly not appropriate for everyone. Those with smaller pots may find the charges incurred through transfer, to far outweigh the financial benefits.
To find out more about QROPS and the benefits available, consult with a financial advisor.