How to get a QROPS
Planning for your retirement abroad need not be overwhelming. As long as you take some professional advice on your financial options and do not rush into anything, you will have all of the arrangements you need in place in a couple of months.
When you have decided which country you would like to move to, the next thing to take into account is your financial security. Where will you bank, and how will your pension arrangements work?
Members of UK pension schemes have the option of transferring their funds into a QROPS, which stands for a Qualifying Recognised Overseas Pension Scheme. These were introduced in 2006, and represent a way for expats to “unlock” their pensions from the UK tax system.
As long as the foreign scheme that you transfer to has been approved by Her Majesty’s Revenue and Customs, you can transfer your money across, free from UK income tax. This immediately saves you money as you would otherwise have to pay at least 25% on the amounts that you withdraw. For the first five years after you leave the UK, your QROPS administrators are obliged to report back to the UK taxman on your investment activities. However, after that time has elapsed, the treasury no longer has an interest in your pension.
Does this sound attractive? If so, the first thing to do is to consult an adviser who is regulated by the Financial Services Authority to get a free assessment of whether your personal circumstances are suitable for a QROPS.
The adviser will ask for details of your current scheme, you plans for the future and your nationality.
Your current scheme
Your QROPS adviser needs details of your current scheme to gauge whether a QROPS is right for you. If you have already started taking benefits from your pension, your scheme may not permit the transfer. Further, if you have a final salary pension, you may not be able to find a QROPS deal that can match your guaranteed income from this. If you do not have a defined benefits scheme, on the other hand, you may find that a QROPS can be a very good deal indeed. Most QROPS advisers do not charge for an initial assessment, so it’s best to ask anyway!
Your plans for the future
Firstly, you need to be fairly sure that you will remain outside of the UK for at least 5 years to think seriously about a QROPS. This is because if you return home to live within this time period, HMRC can land you with a serious tax bill. The other plans your QROPS adviser will want to hear about include the timetable you have for the prospective drawdown of your pension. Are you prepared to have to buy an annuity at the age of 75, or do you want a bit more freedom? Given that QROPS are available in a wide range of countries, you can look for a scheme that lets you have the flexibility that you need.
Your nationality
You do not have to be British to have a QROPS. However, you do have to be a member of a UK pension scheme. You also need to be permitted by your country of domicile to take part in such an arrangement. US citizens might encounter problems with QROPS, but should always take advice on their own particular situation.
Once your QROPS adviser has established these basic facts, he will proceed to the finer details of your requirements. If you have set your heart on moving to a particular country, your QROPS adviser will need to consider the effect of that location on your QROPS tax bill. You will in theory be liable for two tranches of tax for your QROPS: one in the QROPS’ country for investment growth; the other in your country of residence for income you receive. However, in reality your QROPS adviser will advise you about choosing a QROPS country with a very low tax regime.
What will all of this cost you?
By the end of your interview with the QROPS adviser, you will have a variety of options to choose from. You must understand the terms, conditions and consequences of each QROPS under consideration, and most importantly, how much it will cost you. The fees and charges that QROPS administrators levy vary across the board, but your QROPS adviser should be able to negotiate a discount on your behalf.
If you decide to go ahead with a QROPS, just sign on the dotted line and let your adviser do all of the legwork involved in contacting your current scheme administrator. After all, you have packing to do!
