QROPS jurisdictions
In May 2008 there were around 1000 QROPS schemes in over 40 countries and territories meeting HMRC requirements for accepting UK private pension rights. But they don’t all necessarily meet the needs and requirements of someone considering an overseas transfer of their UK private pension rights.
HMRC approved
HMRC authorizes ‘Overseas Pension Schemes’ whose scheme rules are closely aligned with UK pension regulations. One of the main QROPS requirements is to restrict tax free lump sum payments by the QROPS provider to no more than 30% of the total pension value with the balance of the QROPS fund being used to provide an ‘income for life’.
These provisions ensure that, initially at least, those transferring their UK pension rights to a QROPS are not placed at an advantage compared to those whose pension rights remain in the UK.
Financial security and investor protection
Selecting the most appropriate QROPS to receive a transfer of UK pension rights will usually begin by considering the standards of financial services regulation and investor protection within the QROPS jurisdiction. There are currently QROPS providers in a very diverse group of countries including:
Australia, Bangladesh, Bulgaria, Guernsey, Hong Kong, India, Russia, Turkey and even the United States.
But picking the right QROPS jurisdiction is not simply a question of choosing a country that meets the highest standards of investor protection and financial regulation.
QROPS planning
Some QROPS jurisdictions may impose withholding tax on the QROPS pension income of residents (and even citizens) of some countries due to double taxation treaties.
Only when the most appropriate jurisdiction has been selected is it possible to start considering individual QROPS providers.
Once a person has been a non-resident of the UK for 5 complete tax years, their QROPS fund ceases to be subject to UK laws and falls fully under the jurisdiction of the country where the QROPS is established.
This means that on death, the residual QROPS fund would not be subject to UK Inheritance Tax and could be distributed in accordance with the wishes of the scheme member.
The pensions regulations in some QROPS jurisdictions are often quite different to those of the UK meaning that after the five year qualifying period of UK non-residence, it may be possible to enjoy a range of other pension benefits on terms that are far more favourable than those applying to UK pension rights.
Professional advice
The process of planning and arranging the transfer of UK pension rights to a QROPS requires a level of detailed knowledge and experience that is probably best provided by a UK qualified financial adviser.
In the UK this type of specialist pension planning can only be carried out qualified financial advisers and it is our opinion that expats should enjoy the same level of skill and professionalism as those living in the UK.
For more information please email us.
QROPS Bureau