The offshore pension market is awash with rumours and misinformation about qualifying recognised overseas pensions (QROPS).
The market is still experiencing the aftershocks of a recent tax compliance crack down by HM Revenue & Customs that saw more than 300 QROPS pensions close to new business, mainly in Guernsey – with a few in the Isle of Man and New Zealand as well.
Two countries considering QROPS schemes have also dropped out of the market – Jersey and Qatar.
With all these issues, expats need to consider why they need a QROPS.
QROPS pensions offer several advantages to UK expats and international workers with UK pension rights who now live permanently abroad:
- Flexible investment options beyond those available in the UK
- Pension benefits can be paid in one of several major currencies to avoid exchange rate fluctuations that affect the incomes of retirement savers living on fixed incomes
- Tax rates in QROPS jurisdictions are often competitive compared with UK rates, especially with the scrapping of age-related rates
- Retirement savers can draw on a QROPS from age 55
- Unused QROPS funds are beyond the reach of UK inheritance tax and can be paid in full to beneficiaries
- QROPS are available as managed or self-managed schemes
- With more than 2,000 QROPS offered by providers in 48 different countries, the market has something to offer every expat and international worker
The big attraction of a QROPS is bypassing constant UK government intervention in pensions that keep moving back retirement dates, scrapping allowances and changing lifetime allowances.
With no obligation to invest in an annuity or restrictions on drawdown, QROPS also avoid unforeseen tax charges on pension funds not drawn by the age of 75 and the effect of low UK gilt yields on pension incomes.
Any number of small pension pots can be consolidated in to a QROPS to make a bigger investment fund and to reduce charges.
QROPS are not the offshore pension solution for every retirement saver, but do offer a viable option for many expats.