A Qualifying Recognised Overseas Pension Scheme (QROPS) is a pension based offshore for British expats and international workers with pension rights in the UK.
The intention is to give anyone with British pension rights easier access to their retirement savings if they move permanently overseas.
Not just any pension is rated as a QROPS – the provider has to meet strict rules laid down by HM Revenue and Customs.
The UK HMRC produces a list of QROPS every two weeks, this list is not a complete list as some schemes chose not to be listed. It is also important to realise that some listed schemes may in fact not be recognised by time a transfer request is made
The rules are a framework that dictates how all QROPS are managed – but local pension laws in the financial centre hosting a QROPS also have a say in how the funds are invested, tax rules and the benefits paid.
Generally, most QROPS run along the same rules for the first five years of the pension.
HMRC monitors the schemes more closely during this period.
After five years, local pension regulations come into play – although providers have to make reports on the funds for up to 10 years.
With more than 3,000 QROPS in 46 different nations, these finer rules can make a lot of difference to the final value of a pension fund and the tax paid on benefits.
The bottom line is a QROPS pension is not a product like life protection or an ISA, but a set of rules that control the management of retirement savings.
A typical QROPS can offer:
- No income tax on drawing up to 30% of the QROPS fund on retirement
- Flexible investment opportunities in a wide range of funds, markets and commodities
- Payments in a number of major currencies, including US dollars, Sterling and Euros
- Estate planning options to pass on unused funds tax-free
QROPS are increasingly popular with British expats and international workers.
New developments overcome legal hurdles for US residents who want to transfer their UK tax-relieved pension contributions.
QROPS also come in standard and ‘lite’.
Although pension rules do not differentiate between the two, many providers offer QROPS lite for retirement savers with smaller pension funds. The definition of small varies for a fund of between £50,000 and £150,000, depending on the provider.
QROPS lite tend to offer cut down investment options and lower set up and administration costs to make switching to an offshore scheme more cost-effective.
Standard QROPS are for funds of £100,000 or so upwards. Providers will have a wider range of investments and other features included for investors.
Much debate goes on in the world of QROPS offshore pensions for expats about which is the best QROPS jurisdiction for investors.
The answer is no one jurisdiction is best for all retirement savers. The best place to transfer a pension depends on the outcome each individual investor is seeking.
The best way to pick the right QROPS centre is to work with an independent adviser who can tailor a scheme to match a retirement saver’s personal financial objectives.
Latest QROPS News and Information
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