qrops uk pension abroad - your retirement...

COMPELLING REASONS TO TRANSFER YOUR UK PENSION ABROADQROPS

“WITH A GROWING

PENSIONS CRISIS IN THE

UK AND OUTSTANDING

TRANSFER VALUES

AVAILABLE FOR

OFFSHORING,

THERE HAS NEVER BEEN

A BETTER TIME TO

CONSIDER A QROPS.

IT’S A PERFECT STORM.”

QROPS - THE PERFECT STORM 3

QROPS means Qualifying Recognised Overseas Pension Scheme. QROPS schemes originated in 2006, when the

UK tax authority − Her Majesty’s Revenue and Customs (HMRC) – introduced new pension regulations allowing

UK citizens and foreign national UK workers to move their pension funds abroad. These regulations were

introduced as a direct result of EU legislation covering the movement of capital.

A QROPS scheme can only operate legally if it meets specific requirements, as follows:

• HMRC must recognise the scheme for tax purposes. Accordingly, it must be open to residents of the

country where it is based and that country should have stable taxation legislation

• The maximum lump sum cannot be more than 30%, leaving 70% in the fund to provide a

lifelong income

• Scheme members must be at least 55 years of age before they can draw income.

QROPS:A BRIEF

INTRODUCTION


Are you a UK citizen who has left the UK permanently or are intending to retire abroad after building up a UK

pension fund? Then a QROPS offers very clear benefits. Briefly, the most compelling reasons to QROP include:

• Lower tax liability

It is possible to reduce income tax on your pension by up to 45% and you are not subject to the

Life Time Allowance once funds have been transferred

• Larger tax-free lump sum

You can withdraw up to 30% of you pension fund at 55 and it could be tax-free − depending

on the jurisdiction

• Greater flexibility

You can decide where you invest your money and which currency to invest it in

• Maximum peace of mind

Thousands of people with UK pension rights have taken the QROPS option smoothly and

securely since it was launched in 2006

• And finally…

You can leave your entire pension to your chosen beneficiaries.

BENEFITS AT

A GLANCE


To transfer the pension you accrued in the UK to a QROPS scheme in another jurisdiction:

• You must be aged between 18 and 75

• You must have a personal or corporate pension fund worth at least £40,000 to transfer

• You no longer reside in the UK or you have genuine intentions of leaving the UK in the

near future.

DO YOU

QUALIFY?

If you currently live outside the UK but intend to return in the future, QROPS is still a good option to consider. In

this case, most of the benefits applicable to a QROPS would remain in place, except when it comes to how your

pension income is taxed.

WHAT HAPPENS IF YOU RETURN TO THE UK?


There are numerous good reasons why transferring to a QROPS is a no-brainer. Here are just a few of the most

compelling:

Reason 1: Because you could lose almost half your pension to the UK tax man

Let’s face it, we all want to take advantage of legitimate tax breaks and limit the amount of tax we pay. By

transferring your pension to a QROPS, you are effectively inoculating your pension against any UK taxation. That

includes income tax, capital gains tax, death duty or dividend tax. Which means you could reduce your tax bill by up

to 45% and receive your pension tax-free in your local currency.

These are not the only tax benefits of a QROPS pension.

At 55, you are entitled to withdraw up to 30% of your pension fund as a lump sum, which could be tax-free −

depending on the jurisdiction.

And when you die, a QROPS allows you to leave all your pension benefits to your loved ones without exposing

them to any UK tax liability whatsoever.

“[With QROPS], it is possible to avoid many restrictions that would typically be imposed on [your] pension fund if

it remained in the UK, and simultaneously achieve considerable tax savings when the pension is drawn down.”

QROPS: The exportable pension, Daily Telegraph

WHY SHOULD

YOU SERIOUSLY

CONSIDER A

QROPS

TRANSFER?


WHY SHOULD

YOU SERIOUSLY

CONSIDER A

QROPS

TRANSFER?

Reason 2: Because you could take a 30% tax-free lump sum at 55

When you turn 55, a QROPS allows you to drawdown a percentage of your total pension fund as a Pension

Commencement Lump Sum. Depending on the jurisdiction and the percentage you drawdown, your lump sum

could be exempt from UK tax, which means you are free to spend it as you choose.

Reason 3: Because you may end up losing your UK pension altogether

A growing number of people in the UK have ended up in defined benefit pension schemes that are in deficit. In

other words: technically bankrupt. If you are among them, a QROPS may be the best way to protect your pension.

The UK’s pension deficit crisis only applies to defined benefit pension plans – rather than defined contribution

plans. But what is the difference between the two? Briefly:

Defined benefit pension plans involve an employer promising a specified monthly benefit on retirement based on

the employee's earnings history, length of service and age. But promises are just that – promises. Many people

assume that the UK government is obliged to step in if an employer cannot deliver on its promise. This is not the

case.

Defined contribution plans involve an employer setting aside a certain amount or percentage of money for the

benefit of the employee each year. The challenge is that these pension plans are subject to continuous legislation

changes in the UK.


WHY SHOULD

YOU SERIOUSLY

CONSIDER A

QROPS

TRANSFER?

“About 1,000 private-sector pension schemes, including 25 of the largest in the UK, are ‘highly unlikely’ to pay their

members’ pensions in full, new analysis suggests. The stark findings, in a paper published on Monday by the Pensions

Institute, a research body, suggest the number of troubled pension schemes is far higher than officially

acknowledged.” 1,000 defined benefit pension plans ‘unlikely’ to pay in full, Financial Times

Reason 4: Because you can consolidate several pensions into one structure

It’s possible that you have saved for retirement by taking out more than one pension. The catch here is that holding

multiple pensions means you are exposed to multiple, complex and costly charging structures. Among other

negatives, this makes it difficult to tell if you are getting value for money.

By contrast, a QROPS allows you to consolidate multiple pension funds into a single pot. Not only does this help to

keep costs in check, but it also makes your life simpler.

WHY SHOULD

YOU SERIOUSLY

CONSIDER A

QROPS

TRANSFER?


Reason 5: Because nobody else should control your investment decisions

The fact is that default investments o�ered by many pension providers do not necessarily perform.

With a QROPS, you can take steps to make sure your pension fund produces the growth and returns that you

need to maintain your lifestyle. In the process, you can also match your investments to your retirement

destination rather than being restricted to UK-biased investments.

In addition, you can choose to structure your portfolio to generate capital growth or income. A QROPS also

gives you greater flexibility when it comes to choosing the currency you invest in.

“Another advantage [of QROPS] is flexibility of investment strategy. Under UK rules, a pension fund must be

invested in a significantly smaller band of investments. A much wider range of investments, including

commercial property, can be held within a QROPS in the first five years and thereafter, most restrictions are

removed, so that the pension can hold nearly any form of investment.” QROPS: The exportable pension, Daily

Telegraph

WHY SHOULD

YOU SERIOUSLY

CONSIDER A

QROPS

TRANSFER?


Reason 6: Because no-one needs Life Time Allowance charges

Over the recent years, the LTA cap has changed frequently. The trend, however, is firmly downwards and currently

stands at £1 million. If you exceed the LTA, your tax liability is potentially punitive – unless you choose the

offshoring option to protect yourself.

For example, when you transfer your UK pension to a QROPS, its value is tested against the LTA at that stage.

After that, your pension fund falls outside the LTA’s scope even if it continues to grow.

When it comes to pension tax, LTA is a notoriously complex area. If it is likely to affect you, we strongly advise you

to speak to an LTA specialist.

“[Without QROPS], any savings in excess of the LTA will be subject to a tax charge of up to 55% when you start to

take your money, depending on how it’s taken (either lump sum or income). And the charge does not just relate to

monies you have paid into your pension − if you invest successfully and the value of your fund rises to £1m or

more over time, you will still be penalised.” Your pension – and how to protect it from the taxman, Financial Times

WHY SHOULD

YOU SERIOUSLY

CONSIDER A

QROPS

TRANSFER?


Reason 7: Because you deserve to enjoy maximum peace of mind

QROPS is tried, tested – and proven. Since its launch in 2006, thousands of people with UK pension rights have

moved their pensions offshore smoothly and securely. By 2013, 10,000 QROPS transfers were happening annually –

and the figure will almost certainly keep rising.

After all, there are already 4.5 million people from the UK living abroad and every year another 140,000 people

leave the country to join them. Together, they have transferred pension funds worth £1.3 billion offshore since 2006

and the volume of transfers is increasing by an estimated 35% annually.

Transferring your pension fund to a QROPS is straightforward – provided you have the support of experts who

specialise in offshore financial services. They will be able to take you through a proven and straightforward QROPS

process, as follows:

CONVINCED?

WHAT HAPPENS NEXT?

HOW WE CAN EFFICIENTLY TRANSFER YOUR QROPS

EXISTING UK PENSION

CLIENT ANYWHERE IN THE WORLD

CONSULTATION WITH ADVISOR

LOA(LETTER OF AUTHORITY)

UNDERSTAND REQUIREMENTSExplore product options

Send to UK Pension CompanyRequest Valuation, Transfer Pack and FCA advice

Individual personalised consultation

step 1

step 2

Suggested JurisdictionRespective QROPS ProviderProcess Application

Await transfer

ADVISORRECOMMENDATION

Investment made as per client mandate

APPLICATION PACK COURIERED TO PROVIDER

PENSION TRANSFERRED TO PROVIDER

step 3


[email protected]

www.yourretirementplanningadvisor.com

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qrops uk pension abroad - your retirement...

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