QROPS Rules

QROPS rules are the rules which determine whether or not an overseas pension is granted Qualifying Recognised Overseas Pension Scheme (QROPS) status by the UK HMRC. To become a QROPs, in broad terms the scheme receiving the transfer must have in place a trust deed that matches the UK pension law. If you are an expat and are considering transferring your pension from the UK to an overseas pension there is much more to making a successful QROPS than just the qualifying rules.

QROPS that Work
Your QROPS has to work for YOU and your family. You must account for all of the following elements. It is essential to get balanced advice on ALL these elements BEFORE you move your pension.

The QROPS check list

Rules
Investment Choices and Options
Ongoing service
Retirement
Death

Rules
The Rules required to meet the standard are given elsewhere, not least of which (and perhaps the most authoritative place) is the HMRC website. A register of qualifying schemes is also available. However, just because a scheme is on the list it does not mean that all is well. QROPS are still relatively new and some of the schemes, whilst initially being qualifying, subsequently have their status removed because of a inappropriate behaviour by the scheme,

Perhaps the biggest issue and the main cause for the loss of status for QROPs has been the marketing of the ability to take all of the fund as a single payment (pension bust) . Do NOT expect to be able to “pension bust” by moving to a QROPs. It is a pension after all If you try to pension bust there is a REAL possibility that you will lose 82% of your ENTIRE pension FUND.

The main advantage of a QROPS is that you do NOT have to buy an annuity when you retire. This means any money left in your pot after your death can be passed on to your family.

Investment Choices and Options
Economic circumstances will change between now and when you retire . A good investment for one part of the economic cycle will not be such a good one in other places in the cycle. Sufficient flexibility within your QROPS to choose from investments that are going to be right for you is essential. A good QROPS should give you access to over 11,000 funds, generally considered to be enough for most people!! For example, in retirement you may wish to move your investments to lower risk. In retirement, you will want to concentrate on getting income from your investment (your pension).

Ongoing Service
Another factor often overlooked at the start when people move their pensions into a QROPs is ongoing service. In addition to the change of economic circumstances mentioned above, your circumstances will change? You may move countries. You may even return to the UK. What do you need to do to start taking your pension? In all these circumstances, and many more, you will need ongoing advice. Check this will be available to you and how it will be provided.

Retirement
At retirement you will be given a number of options. These will include how much of your pension do you want to take as a lump sum to a maximum of 25% (30% in Isle of Man). The option to take withdrawals from your investments in your QROPs will allow you to choose the amount of pension ranging from zero to 120% of a figure provided by the Government Actuary Department (GAD). Interest rates at the time of retirement and your age amongst other factors will be taken into account when working the maximum pension. This is a little technical but basically you will have flexibility on how you take your pension. A good QROPs will also allow you to vary your income in the future.

Death
Unfortunately all have to deal with this issue. Your QROPS should allow your Spouse to continue taking your FULL pension. With many conventional pensions the widows / widowers pension is only half the main pension, or less. You should also be told what happens if the spouse wishes to take the remaining pension fund as a lump sum. Also make sure that the QROPs you choose has the option to pass on the pension fund to your children and / or grandchildren as a pension. This facility is often known as a family pension.

Finally, as with many aspects of pension planning whilst there are rules, how these rules apply to you is the important factor in the decision making process. Yes you need an adviser who can list the rules but to make a successful QROPs you need someone with the knowledge and experience to help you understand the impact of these rules on you and your family. For that you will need an experienced, qualified and regulated adviser who understands that you are an individual not just a rule book!!

If you have a UK pension, live in Europe and would like to talk to a suitable independent financial adviser please email QROPS ADVICE REQUEST