Essential Guidelines on the QROPS System
If you are a UK expat or one of those people who look
forward to retiring abroad, you must be quite concerned about how to manage
your personal pensions. However, with the introduction of QROPS (Qualifying
Recognized Overseas Pensions Schemes), there is little to worry about your
HMRC’s Role in the QROPS System
QROPS was introduced by Her Majesty’s Revenue and Customs
(HMRC) as an attempt to allow investors possessing UK pension funds to transfer their
pension schemes to another country where they wished to relocate themselves.
The main providers of this pension scheme included insurance companies, banks
as well as various trust institutes. HMRC established a set of rules and
regulations that was to be followed in the QROPS system. It also required the
investors to repot to HMRC during the first five years of departure from the
UK, after which no reporting is required.
Before you decide to transfer your pension scheme into QROPS
keep in mind that only certain pension schemes have been approved by the HMRC
to qualify as QROPS. If you attempt to transfer your funds to an unapproved
pension scheme you will have to bear a penalty for it. Besides this, an
investor cannot get the QROPS if he has already bought an annuity or receives
Final Salary Pension payment. Moreover, you should also evaluate your financial
position and only then opt for the QROPS.
Seeking the Advice of an Independent QROPS Specialist
Since the decision to transfer to QROPS is a critical one,
therefore, the best thing to do is to seek the help of an independent financial
adviser. Nowadays, special pension advisory companies have been established
which are regulated and recognized by the Financial Services Authority (FSA).
They will give you the best advice after going through your details and
In order to be able to get your pension funds transferred to
QROPS, either you must be living outside the UK or you should have a plan to
move abroad in order to avoid the UK tax regime. Nevertheless, the basic idea
that motivates many people to go for the QROPS is that their pension funds are
no longer taxed in compliance with the UK laws.
However, they will be entitled to follow the jurisdiction of
the host country which depends upon the investors’ choice. You should
thoroughly analyse the tax regime of the host country to identify whether it favours
you or not and only then go for the final decision.
Aim for jurisdictions where QROPS have been available for a
longer time, such as Guernsey or the Isle of Man. In these jurisdictions, the
rules are well known by pension trustees and companies.
Make sure you understand the different pension schemes
available. Speak to an expert to make sure a QROPS is the right way forward for
your needs, and get a transfer value analysis conducted, especially if you have
a final salary pension scheme. Also, be certain you are up-to-date with the
latest HMRC rulings and changes.
Make sure your financial advisor sends you regular updates.