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QROPS and EURBS – Common questions asked

By Chris Burke - Topics: Pensions, QROPS, spain, Uncategorised
This article is published on: 23rd January 2014

As a specialist in UK and Irish pensions, here is a list questions I’m often presented with on QROPS and EURBS. If any of these apply to you, do not hesitate to get in touch for a consultation, free of charge. chris.burke@spectrum-ifa.com

UK Pension Transfer or ‘QROPS’ – what does it mean?
A Qualifying Recognised Overseas Pension Scheme (QROPS) is a pension scheme transferred or opened outside the UK that meets requirements set by HMRC in the United Kingdom

If I eventually plan to return to the UK, what would this mean for my Transferred Pension?
If you intend to return to the UK permanently or to work, your Transferred Pension will become subject to the same regulations and tax treatments as a UK domiciled pension. It may then make sense to move it back to the UK as a ‘Self-Invested Pension Plan’ (SIPP) for efficiency.

However, if it is your intention to move back to the UK in the future then it is usually inappropriate to transfer your UK pension to a QROPS.

I might want to change location, will this affect my Transferred Pension?
If you live or work in another country, for example you move from Spain to Switzerland, your overseas pension will stay in the jurisdiction it was set up in. You can continue to make contributions regardless of what country you are living (remember though that if you move back to the UK, your pension will be bound by UK pension regulations). You can receive income and contribute to your Transferred Pension in any currency; so even if you move to several different locations, you can still use your Transferred Pension (QROPS).

If you are taking income and then move to another country, the amount of income tax you pay would vary from country to county.

What currencies can I have my UK Pension in once it is transferred?
Your plan can be denominated in Sterling, Euros, US Dollars, and many other currencies on request. Should it be beneficial to you, the currency can be changed at any stage cost effectively.

I have a UK state pension scheme, is it possible to transfer this also?
It is not possible to transfer a UK state pension overseas – UK transfer applies to your corporate and private pension schemes only.

If I have already taken an annuity, can I still transfer my UK pension overseas?
No, it is no longer possible to transfer your UK pension if you have already taken an annuity.

Do I still need to purchase an annuity once my UK pension has been transferred overseas?
No, you do not need to purchase an annuity once you have transferred your pension overseas.

How much does it cost to transfer my UK pension and set up a Qualified Recognised Overseas Pension?
QROPS costs differ depending on the scheme, location and the service level that you require. The main costs you will be looking at are the initial set-up fee and an annual management fee. They are generally slightly more expensive than a UK pension for the first 5 years and then on a par.

Can I manage the assets within my Transferred Pension myself?
It depends on the provider you decide on – some allow you to manage your own assets, while others insist on managing them for you. We suggest you use a financial adviser for guidance, even if you wish to manage your pension assets yourself. Contact us for more information.

What assets can be transferred to a QROPS?
Most UK pension schemes, and the underlying assets, other than the UK State pension can be transferred overseas (as a QROPS). We recommend an independent evaluation of your schemes to find out which are eligible. Contact us for more information.

Can I keep the same pension funds in my UK pension?
Potentially yes, it is possible to transfer your funds ‘In Specie’ meaning you keep the existing funds and investments from your UK pension.

Can I transfer more than one UK pension overseas into a QROPS?
There is no limit on how many pension transfers a QROPS may receive provided that each scheme relates to the same member. Overseas pensions are a good way of consolidating and managing several schemes in to one.

Is there a minimum transfer value to transfer my UK pensions?
We generally suggest that the combined value of pensions transferred into an overseas pension (QROPS) should exceed £50,000 as an absolute minimum for the scheme to be beneficial to the member. However in the majority of cases it is more appropriate for the final transfer value to exceed £75,000.

When can I access my UK pension?
The retirement date for a transferred pension can usually be any time between the member’s 55th and 75th birthday. Different QROPS jurisdictions may have slightly different age limits, ie Malta’s top age limit is age 70.

Can I still contribute to my transferred pension?
You can receive income and contribute to your Transferred Pension in any currency; so even if you move to several different locations, you can still use your Transferred Pension (QROPS).

How much of the fund can I take as a lump sum?
At the member’s nominated retirement date it is usually possible to take up to 30% of the value of the fund as a lump sum. The lump sum must precede the pension and is a one off payment. For members who have been non-UK resident for less than five full, consecutive tax years the maximum will be 25% of the fund transferred from the UK.

How is my pension calculated?
The basis for the pension withdrawal is calculated using the limits defined by the UK Government Actuaries Department (GAD) tables. . The GAD rates are dependent on your age and the 15 year Gilt rates. Then the maximum income allowable is 120% of this GAD rate. This is in line with the UK drawdown rules. In all cases, the maximum pension level will be reviewed at least every three years and after the maximum age of 70 or 75, depending on juridiction, it will usually be reviewed yearly.

How will my pension be taxed once outside the UK?
As long as there is a Double Taxation Agreement the income is paid Gross and then you are taxed in the country that you are resident in via your tax declaration, again each QROPS jurisdictions rules will vary slightly. In essence you should be no worse off than if you were receiving the pension in the UK or maybe even better off.

What if I die?
Depending on where your next of kin resides then the QROPS can either be paid out in its entirety or be structured so it rolls into a trust for the benefit of your next of kin.

Who will receive my pension when I die?
Your designate as beneficiaries, or, according to your Last Will and Testament.

Can I transfer my UK pension into a QROPS myself?
No. Only appointed intermediaries are allowed to do a QROPS Pension Transfer. This is because you need to have expert advice on this as well as the paperwork being intensive.

I don’t have all the details regarding my UK pensions, what can I do?
With some basic information we can trace most pensions.

How do I know if my UK Pension Transfer scheme is HMRC approved?
The current list of eligible QROPS Pension Transfer schemes can be found here: www.hmrc.gov.uk/PENSIONSCHEMES/qrops.pdf

How does a QROPS work?
In effect it is similar to a UK pension except it’s held in a trust, which reports to the HMRC each year to confirm your pension is safe and adhering to the rules.

What UK pensions can be considered for a Pension Transfer?

  • Personal Pensions
  • Final Salary Pensions
  • Money Purchase Section 32 and Section 226
  • FURB/URB
  • Civil Service & Armed Forces
  • Protected Rights/GMP

When should I not transfer my ‘frozen’ pension?
Each instance varies and you will require the advice of a pension professional. Contact us.

What is the minimum age I can draw benefit and how much?
From age 55 year you can take up to 30% lump sum of your fund. 70% minimum, remaining funds need to provide ‘income for life’.

Article by Chris Burke

Chris BurkeIf you are based in the Barcelona/Costa Brava area you can contact Chris at: chris.burke@spectrum-ifa.com for more information. If you are based in another area within Europe, please complete the form below and we will put a local adviser in touch with you.

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