The proposed changes to Qualifying Recognised Overseas Pension Scheme (QROPS) rules ease the conditions for public service and international organisations schemes to qualify as QROPS.
Since April 2012, some of these schemes have been exposed to delisting as they failed the ‘benefits relief test’ that QROPS rule changes at the time introduced.
HM Revenue and Customs (HMRC) never intended these offshore pensions should be caught by the new rules, so has tinkered with the rules to take them out of the tax trap.
What is an overseas public service scheme?
An overseas public service QROPS is set up to provide benefits to a worker in public service in the country where the QROPS is based
What is an international organisation?
An ‘international organisation’ is an organisation like the United Nations or European Union, but excludes multinational companies.
What are the new rules for these schemes?
Effectively, if a QROPS qualifies as a public service or international organisation scheme, the pension is exempt for the benefits relief test introduced in April 2012.
This test required a QROPS provider to offer the same benefits to resident and non-resident pension members, so no one gained an unfair tax advantage.
What about multinational companies?
These fail to meet the definitions of a public service or international organisation scheme and must still apply the benefits relief test.
Who do the rules apply to?
British expats and international workers with UK pension rights who have worked for a public service or international organisation.
Can investors transfer other pensions in to these schemes?
Providing the rules of the QROPS provider allow, yes, retirement savers can consolidate other pension funds into a public service or international organisation scheme
How is the QROPS transfer made?
Just like any other QROPS transfer. The first step is to find a regulated and QROPS experienced independent financial adviser.
Next, ask your UK pension provider(s) for transfer value assessments.
The IFA will then work out the pros and cons of leaving your pension funds where they are or moving to a QROPS. For instance, if you have a workplace scheme with enhanced benefits, the fund may perform better with the current provider.
If the figures suggest a move to a QROPS is a better option, the IFA will draw up a short-list of schemes that is tailored to your personal financial objectives and attitude to risk.
From then on, the switch is a matter of liaising between the current pension provider and QROPS scheme to transfer the funds.
Visit the HMRC QROPS list page for further information