Many expats think about the Qualifying Recognised Overseas Pension Scheme (QROPS) in terms of a way to take a larger tax-free cash lump sum on retirement – but they come with plenty of other incentives as well.
Here’s a look at seven ways a QROPS offshore pension can give an expat more money when they retire;
- Larger tax-free cash lump sum – This is one of the attractions of a pension in the UK or overseas. Most QROPS pay a 30% lump sum compared with the 25% allowed across the board in the UK
- Payments in most major currencies – Instead of timing money transfers to grab the best exchange rate, a QROPS can pay in many major currencies direct into a local bank. Most UK pensions pay in sterling to a UK bank
- No wealth tax on unspent pensions – QROPS funds are held in trust and are mostly outside the reach of UK inheritance taxes, making passing on wealth easier
- Flexible access on the way – Expats outside Europe are denied pensions freedoms that they could have at home, but this is set to change in April 2017 if the government goes ahead and scraps the 70% rule.
The rule stops non-EU providers from offering pension freedoms by safeguarding 70% of any tax relieved fund transfer to provide a pension
- Pensions paid gross – A real boost for expats in zero tax countries such as the United Arab Emirates.
Income is received without tax deducted at source, unlike that from a UK pension. Local tax rules apply where the expats lives, but if this is zero or low tax, no overseas tax applies
- No lifetime allowance cap – The lifetime allowance of £1 million is applied on transfer, but once the money is in a QROPS, the pension fund can grow without limit nor any fear of tax penalties
- No tax on fund growth – No capital gains tax or local taxes are applied to fund growth
With 110,000 expats switching £8.8 billion in funds from the UK to QROPS since April 2006, these supercharged, tax-effective offshore pensions really do offer some exciting opportunities.
More than 1,200 QROPS are in business across 40 countries offering easy local access.