A Qualifying Recognized Overseas Pension Scheme (QROPS) is an overseas pension plan that meets the HMRC (Her Majesty’s Revenue and Customs).It was launched in 2006 to simplify pensions.
QROPS are becoming more popular to individuals considering to move overseas. The pension scheme does not have to be established in the country that you retire in, you are allowed to move your pension to a tax efficient jurisdiction and have your pension paid into the country of your choice.
QROPS comes with the following benefits:
- It allows the pension fund to grow in a country with favorable tax structure. It can be established in one country with the member living/retiring to a second country.
- Gives you a greater choice of how much income can be drawn and the ability to avoid death taxes.
- Enables testing against falling lifetime allowance, If the LTA is exceeded the excess is taxed at 55% if taken as a lump sum or 25% if taken as income. Sometimes income tax can be applied, thus becoming tax inefficient for pension holders who may exceed the LTA. When UK pensions are transferred to a QROPS, its value is tested against LTA immediately.
- QROPS allows clients to transfer a jurisdiction which pays out a gross income automatically and charges little or no income tax on their pension benefits, only pay tax applicable to their country of residence.
- No income tax charged on death .As long as an individual is below 75 year old, pensions do not exceed the LTA, their pension is passed on to nominated beneficiary as a tax free lump. After the age of 75, benefits are charged at 55% tax if paid as a lump sum to a beneficiary.
- The majority of an individual’s expenditure will be in the currency of their country of residence, which might turn out to be a huge risk with currency fluctuations, however QROPS protects against a permanent depreciation of currency value.
- With a QROPS there is access to a huge range of investment funds across different currencies using fund platforms or offshore bonds.
- Members benefit from earlier retirement of 50-55 years, only if the individual has been a none-resident for 5 complete tax years.
- It provides flexibility to draw income whenever you choose, enabling you to manage and protect your pension against tax men, since you can maximise what they can draw when in a preferable tax jurisdiction.
- QROPS protects you from creditors in the event of bankruptcy. If transferring UK pensions assets to a QROPS, it becomes more difficult for UK courts to take action in the event of divorce or from creditors