A QROPS (Qualifying Recognised Overseas Pension Scheme) is a scheme established outside the UK that allows owners to build up a profitable pension fund, which may include their existing UK pension, while receiving various tax, currency and payout benefits.
Whether you have moved abroad for work, love or leisure, being an expatriate comes with some unique financial challenges. Transferring your UK-based funds into a QROPS is a very attractive option for those who own considerable assets.
Who Can Apply for a QROPS?
If you have invested GBP 100,000 or more in your personal and/or occupational UK pension scheme and live abroad or are planning to move abroad within the next year, you are eligible for a QROPS.
A QROPS allows you to maximise the growth and income potential of your pension, rather than be limited to the restrictions of a UK scheme and lifetime allowance.
Top Five Benefits of a QROPS
For expatriates, this special pension scheme has several advantages over a regular UK pension plan:
1. Avoid UK tax on your pension income.
Whereas the UK government may charge as much as 45 per cent tax on your pension funds, with a QROPS, it may be possible not to pay any tax, depending on your country of residence.
2. Exempt your family from tax after your death.
Whereas, according to current UK pension rules, your beneficiaries will still need to pay tax on their inheritance if you die over the age of 75, this isn’t the case with a QROPS. This special pension scheme will charge no tax on your inheritance, regardless of your age.
3. Benefit from unlimited lifetime allowance.
Your lifetime allowance defines the maximum amount of benefit that you can draw from your pension fund. Currently in the UK, the lifetime allowance is GBP 1 million, and this amount has been decreasing incrementally for several years (it reached a high of GBP 1.8 million in 2010). A QROPS, on the other hand, has an unlimited lifetime allowance, allowing your pension fund to grow to any size without being charged tax.
4. Withdraw a higher lump sum.
A QROPS allows owners to take a 30 per cent lump sum from their pension fund. In the UK, the tax-free lump sum cap is only 25 per cent.
5. Hold and invest your pension fund in any currency.
Instead of being restricted to GBP in the UK, a QROPS allows you to hold and invest your funds in any currency – for example, the local currency in your country of residence.
If you think a QROPS might be for you, get in touch with our team for a free, confidential consultation.