Our new 'Money Matters' series starts with a look at pensions, as Financial Adviser Nicholas Bond explains a little about QROPS and why you need to be aware of them if you're thinking about transferring your pension overseas.
What are QROPS?
For the thousands of people who leave the UK each year to live, work and retire in many destinations, such as Australia, New Zealand, Canada, South Africa and the Middle East, a decision on whether they should be keeping their UK private or occupational pension funds in the UK or whether they should be transferring them overseas, will need to be made.
Since 6th April 2006 an individual looking to transfer their UK pension benefits overseas, can transfer their pension abroad on the condition (from the UK’s HMRC) that the receiving overseas scheme is a QROPS.
So what is a QROPS? The initials stand for Qualifying Recognised Overseas Pensions Scheme, and, in short it is the only type of overseas pension scheme that an individual can transfer a UK pension to.
As a UK pension fund would have both been contributed to and grown with the assistance of HMRC tax relief over the years, HMRC expects those funds to provide benefits broadly in line with those available from a UK pension - for at least the first 5 complete tax years of the member’s overseas residency.
The main reason why an individual would consider a QROPS, however, is the tax benefit for the member. Unlike when a pension is taken from a UK scheme, some QROPS will allow a member to retire either paying less tax or, in some cases, completely tax free.
Just as an example, if a UK pension member is retiring to Australia and transferred their UK pension benefits to an Australian QROPS, the benefits paid from an Australia QROPS are paid entirely tax free at retirement age 60. This would not be the case if the UK pension member left their UK pension benefits where they were and had the income paid to them from the UK.
Before deciding what an individual should do with their UK pensions, they should seek independent advice. QROPS is an important consideration for anyone who will retire abroad.
Nicholas Bond is an authorised representative of Global QROPS Ltd and part of a highly experienced team of UK Financial Advisers who are experts in dealing with overseas pension transfers. Over many years the Global QROPS team have advised hundreds of people in the UK medical profession, who have migrated to Australia and New Zealand (as well as many other popular destinations throughout the globe), regarding the most suitable pension options for their circumstances. Global QROPS are authorised and regulated by the UK’s Financial Conduct Authority (FCA). www.globalqqops.com