QROPS

Where are you planning to retire to? As long as it is not the United Kingdom, getting a QROPS could be a great way to reduce your tax bill in retirement.

Qualifying Recognised Overseas Pension Scheme are those that have been approved as foreign schemes by HMRC. To be a QROPS, the scheme must be regulated and taxed as a pension in its own country, but must also be in a place with a Double Taxation Agreement with the United Kingdom.

Why do QROPS destinations need a DTA?

The requirement for a DTA is because the QROPS will report back to HMRC on your pension for five years after the transfer has taken place. Accordingly, HMRC will know about what takes place in your pension, including transfers and investment gains.

However, after those five years are up (and assuming that you are still a non-resident for tax purposes), HMRC has nothing more to do with your pension.

If a QROPS must be taxed as a pension, how is it better than a UK one?

The HMRC requirement merely means that the QROPS must be treated in the same way as other pensions under the country’s tax regime. So if pensions are taxed, then so must the QROPS. However, the job of a QROPS adviser is to find a solution to your retirement planning needs that is more advantageous than what you already have lined up. Accordingly, you may be able to find a scheme in a country that does not tax pensions at all, or does not tax them after the member has reached a certain age.

What about inheritance tax?

Planning your pension may not just involve thinking about your own needs – you may also take into account the needs of your loved ones. Happily, it has recently been confirmed by HMRC that QROPS are exempt from UK IHT. So as long as your QROPS adviser finds you a scheme that is exempt or neutral from tax in its own country, then it may be possible to pass your pension assets directly on to your heirs.

Qualifying Recognized Overseas Pension Scheme is the biggest tool every British expat wants to use to leverage their pension amount and to make investments abroad.  QROP Scheme is very much in demand among these expats especially who want to settle abroad permanently. The scheme has provided ample choices to the people who are more interested in making investments outside UK. So one can keep track of what are the advantages attached to the QROPS.

Now take quick look at the advantages associated with this scheme.

The most important advantage is that unlike earlier now the British expats need not to pay 25 % UK income tax. This tax was being enforced upon the pension fund of the people who used to move out of the Britain and settle abroad. Under the QROP Scheme, now the expat can utilize their entire pension sum and can enjoy tax waiving also. The QROPS introduced in 2006 provided a respite in this matter and continue to grow strong. So, one can enjoy this benefit under the QROP Scheme.

Another problem is the hindrances being created by the UK pension system for the pensioners. The pension system advises pensioners to buy an annuity or to make similar arrangements to get regular income.  However, it could have been a pensioner’s choice where and how to make an investment especially if he or she wants to offer some money to help some one or invest in other program.

This is another reason because under the QROP scheme, persons enjoy enough freedom to make an investment and help them according to their plan of investment.

Moreover the fast depleting interest rates can be very disturbing for you. If you have opted for the QROP scheme then you can get the interest rate in the currency of the country where you would be living. This will certainly make a difference.

However you may not enjoy freedom from UK inheritance tax. You need a better OROPS advisor to get a proper help in this matter. The QROP Scheme advantages help you when plan that you will not settle in UK. However, if you want to return to UK within five years then the scheme will not be of any use to you.

You can seek an opinion of an experience QROP Scheme advisor on all such issues and can make an investment of your choice. You can make a contact or seek details online also. You can visit the websites of the QROPS advisors and can seek a professional advice. In the beginning they may not charge any thing from you but after your application is being forwarded they may charge a fee from you.

You need to be very cautious in approach as the matter relates to your hard earned money so you have every right to know where to make an investment.

QROPS

Offshore pensions boost for UK expats

UK taxpayers who are moving overseas for good might want to consider the advantages of packing up and taking their pensions along with their other belongings.

Setting up an offshore pension scheme often has a lot of benefits for expats over drawing a UK based and regulated pension from overseas.

Pension systems can be extremely complex so expert advice is recommended. Read lots of articles and reports to gain a solid understanding of QROPS before you transfer you UK pension.

Offshore pensions – or QROPS (Qualifying Recognised Overseas Pension Scheme, pronounced ‘Q-ROPS’) – rip away a lot of the strict rules of a UK pension.

No annuity needed

One of the biggest attractions for expats taking a pension overseas is the ball and chain of having to buy an annuity is ripped away.

Annuities are considered unattractive by many pension savers, especially with the low rates of return offered, the effects of inflation and that many people do not live long enough to enjoy their savings.

If the pension stayed shackled to the UK system, anyone who has not invested in an annuity by the time they are 75 could face a huge tax charge.

Flexibility in investments

QROPS come in self-managed or managed packages giving savers choice and control over how their cash is invested.

Reaping the benefits

QROPS allow savers to access their pensions with less rules and regulations than a UK pension.

Depending on a QROPS scheme rules, a saver might:

§  Start drawing on the pension when reaching 50-years-old

§  Take up to 30% as a single tax free lump sum

§  Roll over all or part of the fund in to investments that give a regular income

As the recent global recession has shown, the best-laid investment plans may hit unforeseen problems. A QROPS gives expats the freedom to make the most of their financial circumstances as and when they need to.

Passing on wealth

Flag this as a huge benefit for a QROPS over a UK based pension - leaving a pension in the UK means having to invest in the miserable returns from an annuity, and to add insult to injury, when you die, the annuity dies with you.

A QROPS allows the cash amassed in the scheme to be passed on when the policyholder dies.

The 5-year rule and tax

HM Revenue and Customs (HMRC) will require the QROPS scheme provider to pass on full details of payments made to a saver for five complete tax years after they leave the UK – after that the scheme provider is under no obligation to tell HMRC about your QROPS.

Generally, taxes are paid in the country where you are deemed resident. So any tax due on income from pensions or other investments is determined by the current rates in the country where you live. The same goes for any inheritance tax when you die.

So far, so good, but rushing in to setting up a QROPS is no good for any prospective investor.

At it’s simplest, a QROPS is no more complex than any other pension product – but each saver needs to consider the merits of moving their pension to an offshore pension by taking professional, independent advice.

The five key factors any potential QROPS investor needs to know are:

1.   The starting point for transferring any UK pension funds in to a QROPS is finding out the total transfer value

2.   How will the tax regime in the country where you are resident affect the cash you receive from your QROPS?

3.   How much will you be charged for transferring your pension in to a QROPS? 

This includes what you will lose, if anything, in transferring your pension plus advisor fees. Make sure you have all these figures to hand in advance of any decision to transfer.

4.   How much are annual management charges?

5.   What happens to your QROPS if you have to come back to the UK or move to another tax jurisdiction?

HMRC keeps a database of compliant QROPS schemes. Your pension provider will not be allowed to transfer any funds to a scheme that is not on the database.

Some countries are also unsuitable for QROPS pension schemes, for instance Singapore was blacklisted by HMRC over misselling issues with pension advisors

If you are interested in QROPS and would like expert advice, we would recommend seeking the best advice possible.