It’s true that British expats could have more tax-free cash to spend simply by shuffling their pension money offshore.
Moving retirement cash from a British onshore pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) gives an instant tax-free uplift to money in the fund.
The tax-free lump sum is immediately increased by 20%.
That’s because a QROPS pays a 30% lump sum rather than the 25% maximum available in the UK.
So a £100,000 pension automatically pays £30,000 instead of £25,000 without tax, giving expats more to spend.
International pension with local benefits
QROPS are international pensions with lots of local benefits.
One perennial problem for expats is when to juggle money between sterling and local currency bank accounts to get the best foreign exchange rate.
Expats with a QROPS can forget the time, hassle and cost of exchange rate fluctuations as the offshore pensions can pay out in one of many major currencies direct into a local bank account.
Income tax becomes a lot easier as well.
QROPS benefits are paid gross, so any taxes are paid locally as well. If an expat lives in a zero rate country such as the United Arab Emirates, there is no tax to pay. If income tax is due, this is paid at a local rate.
QROPS come with other advantages as well.
Golden goodbye cash
For expats yet to reach the pay-out age of 55, QROPS offer a much wider range of equities, bonds, commodities and currencies for investors than a UK pension.
QROPS are ideal homes for expats worried about breaching the UK lifetime allowance on pension savings. Although the fund has to be less than the limit of £1 million on transfer, once inside the protection of a QROPS, the fund can grow to any size without penalty.
This makes the offshore pensions particularly attractive for expats offered a golden goodbye to quit a UK workplace scheme.
More than 1,200 QROPS pensions are available from 42 international finance centres, so finding one to suit the most complicated financial circumstances should not be a problem.
Even expats in a country without a local provider can transfer into a QROPS without a problem.