If you are an expat you might have heard people talking about getting a QROPS. What are they? Should you get one, and how might you go about it?
QROPS stands for Qualifying Recognised Overseas Pension Scheme, and it means a foreign pension scheme that has been authorised by HMRC for the transfer of UK pension assets. Unfortunately, only private pensions can be transferred to QROPS.
The important detail that you may hear being bandied around about QROPS is that by taking them outside of the United Kingdom, you take the pensions outside of the UK’s tax regime. Accordingly, when you choose a QROPS you also have the luxury of choosing which tax jurisdiction to choose.
If all this sounds rather daunting, don’t panic. In reality, if you find a good QROPS adviser, they will take you through the difficult decisions that need to be made.
In the first instance, your QROPS adviser should be able to speak to you about your current arrangements, and advise whether a QROPS transfer is desirable or even possible.
If your current UK pension is a final salary scheme, you may not be able to better a gold plated deal anywhere else in the pensions world, whether in the UK or abroad. However, with standard defined contributions deals, a QROPS may be well worth a look.
Likewise, your QROPS adviser should also look at the details of your current scheme to see if a QROPS transfer is even possible. This may depend on the rules of your individual scheme, so you may wish to bring your paperwork to show your QROPS adviser so that they can establish whether a QROPS is a possibility.
There are also a number of rules to be explained. The most important one is that a QROPS investor must be resident outside of the United Kingdom to take advantage of the tax exemption. The second is that the QROPS you choose must have been individually approved by the men in suits at HMRC.
Once those rules have been explained and understood, it’s time to start planning your virtually tax free retirement.