QROPS is it the right way forward?
Pensioners in Spain , from the UK are getting hammered by the exchange rate at the moment. Any who still have untaken pension funds back in the UK, will have seen a lot written about the bebefits of QROPS, particularly the tax saving elements. Recent rule changes mean that these schemes are not necessarily the “golden goose” that they were perceived to be.
Certainly there is more of a benefit for those who have been aaway from the UK 5 years, as they can get their hands on the fund more quickly, and have choices, but for most people, I would suggest that you seek independent advice relating to your specific needs, as there is no “generic” standard advice on this complex area.
As well as exchange risk considerations, the implications for taxation in the country you are “fiscally” resident comes into play.
I would recommend caution, as QROPS may not necessarily offer the “holy grail” that has been portrayed by the “experts” in Spain.
QROPS What is it?
A Qualifying Recognised Overseas Pension Scheme (QROPS) is any scheme recognised by HMRC as meeting standards and conditions equivalent to a UK pension. This approval allows anyone with a UK registered pension who is living outside the UK, or is intending to leave the UK, to transfer their UK registered pension offshore.
To be a QROPS, a scheme must meet various prescribed conditions. These relate to the location in which the scheme is established, how it is regulated, and the benefit options available.
The key attraction of transferring UK pension rights to a QROPS lies in the fact that for those who are currently in the position of having been non UK resident for at least five tax years (or when they satisfy that condition) this requirement falls away.
After that time the pension fund becomes subject to the laws of the relevant overseas jurisdiction – and for example the UK requirement to purchase an annuity by age 75 (or be faced with the prospect of a possible 82% tax charge) no longer applies.
Since the Finance Act 2008 the argument for transferring UK pension rights to a QROPS for the expat has become even more compelling. A new clause has been inserted into the Inheritance Tax Act 1984 which gives QROPS freedom from UK IHT based on our understanding of this new legislation.
This means that not only is there no requirement to buy an annuity within a QROPS because of tax reasons, but that the remaining fund following death should be available to beneficiaries without any deduction of United Kingdom tax.
You should always speak to a qualified adviser about the complexities of QROPS
