Qualifying Recognised Overseas Pension Schemes (QROPS) for expats are very different from ordinary onshore pensions.
It’s easy to get confused by how they work and who qualifies for the tax and investment benefits that come with the package.
To help out, here are the answers to some of the most common questions expats ask about QROPS.
How do I qualify for a QROPS?
First step is to work out your tax residence – that’s confirming the financial jurisdiction where you pay income tax.
This is not as simple as declaring you live in a certain place, becoming an expat involves moving your life overseas and breaking social and financial ties with the UK.
Tax residence is a matter of fact rather than opinion.
QROPS are also open to UK non-residents who have pension rights in the UK, but who now live permanently overseas.
How do I choose the right QROPS?
With around 1,275 QROPS available from 42 financial centres, choosing the right pension can be difficult.
Your IFA will discuss your personal financial goals, your thoughts about investments and your tax residence with you. Depending on the answers, a short list of suitable pensions will be drawn up for you to choose the one to go with.
Do I need an IFA to set up a QROPS?
Yes. A suitably regulated and qualified IFA is essential. Most QROPS providers will insist any application to transfer a UK pension is accompanied by an investment recommendation from an IFA.
Also, UK pension law insists that any retirement savers transferring for funds valued at more than £30,000 takes financial advice.
I live in a country without a QROPS provider?
No problem. Some financial centres offer ‘third party’ QROPS, which are offshore pensions that allow retirement savers to live anywhere in the world while their pensions remain in the same place.
Malta, Gibraltar and Isle of Man QROPS are the main financial centres offering this service.
These QROPS are suited for expats on the move, such as workers on assignment who move countries every few months.
The benefit is not having to pay set up and transfer costs every time they move.
Can any pension transfer to a QROPS?
No, there are some restrictions.
The pension should not be in drawdown, the state pension cannot be transferred and neither can civil service or public sector pensions.