Around 10,000 retirement savers are switching their onshore UK pensions to a Qualifying Recognised Overseas Pension Scheme (QROPS) each year, according to HM Revenue and Customs.
QROPS offer expats living or working overseas considerable tax and investment benefits compared to a UK pension.
However, many thousands of expats who could have a more prosperous retirement with a QROPS are failing to make the change because they either do not know about the pensions or how they offer them a financial advantage over their current pension arrangements.
Here’s a quick and handy guide to making the most of QROPS:
Can I move my pension pot anywhere offshore?
No. QROPS operate under strict rules – but with more than 3,500 pensions offered in 42 different financial jurisdictions, pension savers have plenty of choice to easily find the right scheme to suit their financial needs.
Can I access all of my money under QROPS?
QROPS rules allow many providers to pay enhanced benefits – like up to a 30% tax-free lump sum compared with a maximum 25% in the UK, but the rest of the pension is ring-fenced to provide an income in retirement
What if I don’t stay in the country I move to when I start a QROPS?
QROPS come in two ‘flavours’. Some countries, like Jersey and Guernsey only allow residents to open a QROPS, but other jurisdictions, like Gibraltar, the Isle of Man and Gibraltar have pension rules that allow retirement savers to base their QROPS in their country and live elsewhere.
This is especially helpful for expats who are moving between countries to work who have not yet decided where to retire.
What happens to the tax relief on my UK pension contributions?
A big plus for QROPS is any transfer out of a UK pension includes any tax relief paid to top up contributions made while living in the UK, but any future contributions do not pick up tax relief.
How much do I need to start a QROPS?
The amount varies between providers. QROPS rules do not state any minimum, but some schemes accept ‘small pot’ transfers of £25,000 or so, while others only consider transfers of £100,000 or more.
Take professional advice
Consult an experienced QROPS adviser about making the switch – someone who is qualified and regulated. The right IFA will tailor a QROPS to suit your retirement objectives and not point you towards a specific provider or jurisdiction that might not offer the best value for money