How to Decode and Check a QROPS
As an expat your pension choices can seem labyrinthine. You may have been a member of one scheme over your entire career or perhaps you have paid into several smaller workplace schemes across different countries. Knowing what to do can seem like an enigma.
There are several types of expat pension transfer available, but knowing whether a transfer is right for you will take some investigation (and almost certainly expert advice).
Here we take a look at QROPS: what is a QROPS, are they a good idea and are they a suitable retirement savings vehicle for you if you intend to move abroad or already have done so?
What is a QROPS?
"QROPS" means ‘qualifying recognised overseas pension scheme'. The final two letters in the acronym are self-explanatory. As for the first three, they denote the following:
- "Qualifying": This means that the scheme meets the requirements as laid down by the United Kingdom and HM Revenue and Customs (HMRC).
- "Recognised": This means that HMRC officially recognises the scheme as eligible to receive transfers from registered UK pension schemes.
- Overseas: This means that the pension scheme is registered in a country outside of the UK.
Who can make an expat QROPS transfer?
If you are a member of either a UK-based Defined Contribution Scheme (sometimes referred to as a ‘money purchase' scheme) or a Defined Benefit Scheme (sometimes referred to as a ‘Final Salary Scheme) then a QROPS is available to you. However, not everyone is a suitable candidate for a QROPS transfer – for example, some savers might be better off remaining in their existing scheme, while others might be better off transferring into a bespoke Self-invested Personal Pension (SIPP) or investing in a totally different vehicle such as a UCITS-regulated portfolio.
Furthermore, under the UK Pension Schemes Act 2015 all defined benefit scheme members with "safeguarded benefits" worth £30,000 or more must receive expat pension transfer advice from a suitably qualified and independent specialist whose work is authorised and regulated by the Financial Conduct Authority (FCA).
How to check if a QROPS is both qualifying and recognised
HMRC carries a list of providers offering qualifying recognised overseas pension schemes. You can find the list here.
It's worth noting that since March 2017 certain QROPS transfers will attract a 25% tax charge, known as the overseas transfer charge, which is levied by HMRC, so it's always worth seeking licensed, regulated and impartial advice before going ahead with any type of pension transfer to see if it will, indeed, be in your best interests.
Why transfer a pension
A pension transfer can help guard against unwelcome currency exchange fluctuations and can provide welcome simplification to your wealth management strategy, but any pension transfer you undertake should always offer you more flexibility and choice in respect of your pension savings.
Whether you are already an expat or are on the cusp of moving abroad, the expat pension transfer specialists at Blacktower Financial Management can help you decide whether it would be in your interests to transfer your pension to a QROPS or whether a SIPP or alternative investment vehicle would be more suitable.
If you would like more information about QROPS and how they compare to other types of expat pension transfer, call us today to speak directly with an advisor.