Simply put, a Qualifying Recognised Overseas Pension Scheme, or QROPS, is an overseas pension scheme into which UK pension rights can be transferred.
Since 2006, people with UK pensions who are, or will become, non-resident in the UK for tax purposes can move their pension benefits out of the UK to a QROPS. This can prove highly advantageous.
The scheme must meet certain criteria set out by HM Revenue and Customs (HMRC) and act as if it were a UK scheme for QROPS members who have been resident in the UK at any time in the previous five tax years.
If you have emigrated from the UK or you are about to do so, and you have transferable pension assets in the UK, then you may be eligible to use a QROPS.
Benefits of a QROPS
A QROPS can offer significant taxation and investment advantages, allowing many UK pension holders to get more out of their UK pension.
A QROPS provides:
- Greater control over where your pension fund is invested
- Tax efficiency, you may be able to substantially reduce the tax that you would have to pay when accessing your pension
- Inheritance benefits, you can pass on your pension pot to your beneficiary upon death
- Simplicity, numerous pensions can be consolidated in one QROPS
- The key attraction of transferring UK pension rights to a QROPS for those who have been non-UK resident for at least five tax years is that the pension fund becomes subject to some of the laws of the relevant overseas jurisdiction
- 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
- As well as there being no requirement to buy an annuity within a QROPS for tax reasons, the remaining fund following death should also be available to beneficiaries without any deduction of United Kingdom tax
- Among other advantages is, for example, the fact that 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