QROPS is a term that many British expats will have heard of, but what does it mean?
Anyone with a UK pension scheme who now lives overseas as an expatriate, can transfer their pension into a QROPS (Qualifying Recognised Overseas Pension Scheme).
Follow the procedures correctly and the financial benefits can be huge, producing greater investment growth and flexibility, and assuring the future financial security of your pension.
Some Key QROPS FAQs
QROPS providers are required to notify HMRC of any payments from transferred pensions in respect of a relevant member.
However this only applies when the member is resident in the UK when the payment is made, or has been resident in the UK earlier in the tax year in which the payment is made or in any of the five tax years immediately preceding that tax year.
No, although you may if you wish. Without the need to purchase an annuity it means you can invest into
better returning assets and gain the advantage of passing any remaining funds upon death to your loved
Under certain circumstances you can manage the assets yourself with total freedom, or you can work with an investment manager, or appoint one to make the decisions for you or with you. It really depends what you are looking to achieve and how involved you would like to be with the investment decisions. There is no limit to the size of funds that may be accumulated within a QROPS.
No. After the 5 years of non UK residency there are fewer restrictions. However, access is something that
you will need to discuss with your adviser. At 55 you should be able to access 30% of the fund free of tax, depending on the scheme.
It is possible to achieve a genuinely minimal taxation rate, depending on the scheme, this will depend on
where you are tax resident at the time.
Strong investor protection from a well established jurisdiction similar to the UK, transparency of charges and tax efficiency.
A transfer to a QROPS is classified by HMRC as a benefit crystallisation and is not subject to taxation unless the fund to be transferred exceeds the lifetime allowance (currently £1.5 million in 2012/2013 tax year).
Key Benefits of QROPS
• No need to purchase an annuity or pay UK tax charge upon death.
• All unused pension funds can be left to your beneficiaries.
• Much greater investment freedom.
• Tax free lump sum of up to 30%.
• Access to onshore and offshore funds with highest fixed deposit rates, plus total diversification.
• Pension income is much more tax efficient.
• Take income and benefits in the currency of your choice.
• Protection against possible future creditors. (Depending on QROPS jurisdiction).
• Greater confidentiality.
Defined Benefit pension liabilities proportion hits record high
The defined benefit pension liabilities of the FTSE350 company schemes have now reached a record 35% of their combined market capitalisation, according to human resources company Aon Hewitt.
As of 30th June 2012, FTSE350 liabilities currently stand at£567 billion, which means that they have a deficit of £64 billion. The staggering proportion is due to the rising liabilities that are being created
by record low gilt yields which have been driven down by the Bank of England’s quantitative easing programme of gilt purchases and by the increasing demand for the relative safe investment haven status of the UK.
Aon Hewitt Principal Marcus Hurd commented that, “When the scheme liability is over a third of the FTSE 350’s market capitalisation, it is no wonder that small changes in schemes are having a disproportionate effect on the sponsor’s finances…Pension scheme liabilities have increased by 18% since March 2011 while the market capitalisation of the FTSE 350 has actually fallen”.
Experts therefore believe that it no longer makes sense for workers to depend on their employers for a
sustainable retirement income, as amplified in the figures above, making personal retirement provision
essential and for expatriates moving their pensions into QROPS highly attractive.
Contact your local deVere office to learn more about QROPS
For more information on the deVere Group, see our Inspire page here