QROPS, Offshore Pensions and Retirement Options for Expatriates

According to the Sunday Times there has been a significant increase in demand from those seeking to leave the UK and take their pension abroad with them – in part they put this down to the impending 50% tax hike in Britain, but in part we would say it has a great deal more to do with people being prepared to turn their backs on the UK for good.

With the news out yesterday that the government is seeking to sell off about 3 billion pounds worth of public assets in a bid to ease national debt, (that apparently already exceeds the 1 trillion pound mark – we’re thinking ‘drop’ and ‘the ocean’), it’s easy to see that things in great Britain are not going to get any better for a long time, and in fact, they’re highly likely to get an awful lot worse…

So, it’s no wonder that people like you may want to move abroad – and you probably want to take your savings with you as well.  After all, would you leave your money in a bankrupt country willingly?  No – neither would we!  So, here for your assistance today is a report about QROPS, offshore pensions and the retirement options for expatriates so that you can take all your savings offshore and overseas to safer, more tax friendly havens.

QROPS – Qualifying Recognised Overseas Pension Schemes

Back in 2006 the British government came up with the idea that it would support the concept of an overseas pension for expatriates – this was a good thing!  Prior to this point, if you expatriated you had to think about leaving what pensions you had accrued behind in the UK to stagnate and suffer…but now, there’s a much better scheme in place for many people to take advantage of.  Now, whether you have a private or a public sector pension, you can potentially take it with you when you move abroad, thanks to QROPS or qualifying recognised overseas pension schemes.

A QROP scheme is pretty much a personal pension – it’s simply established elsewhere, other than the UK – with many set up in tax advantageous places such as Guernsey and the Isle of Man where funds can grow and advance in a more timely fashion potentially!  For a scheme to be ‘qualifying’ it has to work in a similar way to a British onshore pension by confirming that, in most cases, a minimum of 70% of a person’s fund will be used to provide them with an income in retirement.  What’s more, as with an onshore pension, you cannot access funds before the age of 50. 

You’re probably thinking ‘so far so what’ – but now here’s the interesting bit, for the first five years that your funds are in your new QROPS, your scheme’s provider has to report all dealings with you and all activity within your offshore pension to the taxman at HMRC – but after this point, there are no reporting requirements unless you return to the UK!

Other benefits of such schemes include the fact that you do not have to buy an annuity with your final pension pot – this is a massive advantage – and as a bottom line it means that you can leave remaining funds in your will to your heirs – you cannot do this if you purchase an annuity with your onshore British pension.  QROPS are also the embodiment of flexible retirement savings as you have plenty of choice of fund to choose from, and the underlying assets that these funds invest in are diverse – unlike a traditional personal or public sector pension that tends to be inflexible by nature.

QROPS are not suitable for everyone however – it depends how much is in your UK pot that you want to transfer in – if anything; it also depends whether you’re planning to live, work and therefore save abroad for an extended period of time, and finally of course, it depends on where you’re going to retire to because ultimately, your pension proceeds will be taxed according to the nation you retire to and where you end up being tax resident!  And contrary to popular belief, there are actually some countries that tax more than they do in the UK!

So, the bottom line when it comes to QROPS is seek qualified and professional advice.  Not all overseas pension schemes are qualifying and recognised either, and so you must make sure you’re dealing with a reputable adviser who is giving good advice about schemes on HMRC’s accepted list.

At the moment, costs are considered quite high – however, as the market advances and develops, as more players bring products to the table, so competition for funds increases and competition drives down fees for consumers!  So we think QROPS are here to stay, and we also think that if you’re moving to live abroad, you’re already working overseas or you’re planning a retirement abroad you should look into your eligibility for QROPS and examine their suitability for you…