QROPS – Take Control of Your UK Pension
Many expatriates remain unaware that British pensions can be transferred out of the UK. Should you be looking at using QROPS legislation to take control of your UK pension?
Since April 2006, individuals who have left the UK, who have left behind private or company pension benefits, can now effect a QROPS transfer. HMRC introduced QROPS ‘Qualifying Recognised Overseas Pension Schemes’ which allow a non-UK resident to transfer their frozen pension outside of the UK.
This has led to many expats contacting their advisers for further information on how to improve their retirement options. And it’s not just the British; there are many foreign nationals who have built up a pension pot while working in the UK. Pension transfers under QROPS are a tax efficient way for expats to greatly enhance their pension flexibility. Pensions in the UK are subject to very restrictive tax rules when it comes to succession planning and this can be much improved by moving the pension to another jurisdiction. In some circumstances it may not be appropriate to transfer your pension, It is essential that a proper analysis is carried by a licensed and fully qualified adviser. This is a highly specialist type of financial planning and should not be entered into lightly.
Should I Consider Using QROPS?
If you fit the profile below, then you should consider contacting us for a free analysis of your situation.
- You are no longer resident in the UK.
- You do not intend to return to the UK.
- You have a UK pension (or a number of pensions) with a total minimum value of GBP 50,000.
So what are the key benefits?
Upon death most people would like to think that as much of their assets would be passed on to their heirs as possible. However in the UK there can be a tax charge of 55% of the remaining pension when it is in drawdown and paid out as a death lump sum. Further, with many conventional final salary schemes the widow’s/widower’s pension is only half the main pension, sometimes less if the spouse is quite a bit younger. A QROPS gives you the option to pass on the pension fund to your spouse, children and/or grandchildren as a pension or a lump sum, free of tax.
By moving an arrangement out of the UK, there can be a much wider choice of international investments available. Some existing pension schemes can be very restrictive in the choice of funds (UK only), or permitted investments. Most QROPS transfers can provide access to a wide range of sophisticated funds, to suit your risk profile and lifestyle stage.
The underlying investments and income payments from a QROPS scheme can be denominated in a choice of currencies to reduce the risk of currency fluctuations. Many British retirees have suffered as the British pound depreciated in recent years against the currency zone they are living in. a QROPS can help you manage this risk.
Flexibility in Retirement
Your circumstances can change during your retirement years, for example you may still do some work or you may move countries again. You will therefore need a number of options when it comes to taking your pension benefits. You have to consider the PCLS (Pension Commencement Lump Sum – up to 30% with a QROPS scheme) and the level of regular income you need. A good solution under QROPS will allow you to vary your income in the future, rather than fixing it at one rate.
Above all, getting professional advice is crucial, as well as choosing the right jurisdiction in which to transfer under the QROPS provisions. The pension should still be treated as a pension, i.e. it is not intended to be a way to ‘cash-out’ early. HMRC will come down hard on individuals, schemes and jurisdictions which abuse the rules.
A suitably approved scheme provider is also essential. At Spectrum we offer a free analysis of your pensions by our highly qualified advisory team, as well as our ongoing advice on portfolio management and the various retirement options.