How Do QROPS Schemes Work
Qualifying Recognised Overseas Pension Schemes
QROPS consist of two elements:
- The QROPS Trustees: the trustees are responsible for the administration of the QROPS scheme; and to ensure that it operates within the QROPS and HMRC rules and regulations.
- The QROPS investment vehicle: this is where your underlying assets are invested.
Because of the significant opportunities for such schemes to be abused; HMRC tend to monitor these closely and penalise members and schemes for making unauthorised payments. During the first five years QROPS providers are required to report all payments from the scheme to HMRC.
This is another reason why the correct advice and the selecting of a provider (the “Trustee”) that has a good standing with HMRC is paramount here.
With regard to the choice of investment vehicle
- A highly experienced investment management team with over 19 years of expertise.
- Regular reviews on your investments; and to changes to your personal circumstances.
What is the minimum value I can transfer to a QROPS?
In our experience the better schemes require funding of around 50,000 GBP. However, there are similar schemes available from 25,000 GBP. Whatever your situation, and UK pension transfer value, contact us anyway as there is usually a solution to be found.
Will payments from my QROPS pension fund be reported to HMRC in the UK?
QROPS providers are required to notify HMRC of any payments from transferred pensions in respect of a relevant member during the initial 5 years from the time the member ceased to be an ordinary resident of the UK for tax purposes.
And in the event that the member becomes an ordinary resident for tax purposes in the UK; when the payment is made.
If I transfer my UK pension into a QROPS will I have to buy an annuity?
No, although you may if you wish. Without the need to purchase an annuity it means you can invest into wide ranging assets, and gain the advantage of passing any remaining funds upon your premature death to your loved ones. Without any liability to the UK Pension Tax at 55% or UK IHT at 40%.
Who may apply to transfer their pension into a QROPS?
Most of the schemes are not available to US citizens and there can be problems with US residents; however any other nationality may apply.
What investment choice and freedom will I have with a QROPS?
The investment choice will normally be very wide indeed. Under certain circumstances you can
manage the assets yourself with total freedom, or work with an investment manager / financial adviser.
You may also appoint an investment manager to make the decisions for you or with you.
It really depends what you are looking to achieve and how involved you would like to be with the investment decisions.
We can arrange for an investment adviser to work with you by reviewing your QROPS fund assets and make recommendations to you on a quarterly basis.
There is no limit to the size of funds that may be accumulated within a QROPS; and a QROPS is exempt from the UK Lifetime Allowance (the maximum value of the underlying fund; before tax on any excess becomes liable; currently at a tax rate of 55%).
How & when can I take benefits from my QROPS?
Typically there is considerable flexibility in the timing of taking any benefits from a QROPS. Usually benefits will be taken from the age of 55, but it can be possible to access funds before or after these ages. Please contact us for further information dependent on your circumstances.
Once I’ve transferred my UK pension to a QROPS can I access my fund as a 100% lump sum?
Unfortunately the answer here is ‘no’. This is because the funds that you have built up (after taking your TAX FREE lump sum) are required under the current QROPS / HMRC rules to provide an income for you and your dependents for the rest of your life, and perhaps beyond.
How will any benefits or withdrawals be taxed?
Most of the schemes we recommend the pension income is paid GROSS (TAX FREE). The tax treatment of any income you receive will depend upon where you are tax resident at the time. (Note: we recommend you seek individual tax advice regarding your particular circumstances).
What will happen to my QROPS pension fund upon my death?
Typically – and a major benefit of a QROPS – is that the remaining value of the fund is paid directly to your beneficiaries. Without any liability to the UK Pension Tax at 55% or UK IHT at 40%.
I may go back to the UK in the future, can I still benefit?
QROPS are for people whose intent is not to return to the UK in the future. However if this is some time away – say 10 years plus – then you may still want to consider a QROPS as the benefits of ownership are substantial. Please contact us to discuss your particular circumstances.
I have a UK SIPP and I have drawn an income, can I benefit?
A QROPS can be used to receive transfer values from any UK registered pension scheme whether this is for example a Personal Pension Plan (PPP), a Self Invested Personal Pension Plan (SIPP), a Small Self Administered Pension Scheme (SASS), or an Occupational Scheme whether it’s a Money Purchase Scheme or a Final Salary Scheme – all can be transferred to a QROPS.
However if the pension scheme benefits have or are already being taken, then it is not possible to undertake the transfer.
How long will a transfer to a QROPS take?
Most transfers can take 2-3 months. The process is initiated by you completing a letter of authority enabling us to get the relevant information from your existing pension provider; for example the current benefits and a transfer value. This is not binding in any way, and will only allow us to receive the details regarding the pension scheme that you have. However it will allow us to provide you with individual expert independent advice reflecting your personal individual circumstances and future plans.
Can I transfer funds and assets in my UK scheme or do I have to liquidate them into cash?
This will depend on the pension provider you have, and the assets that you hold. Generally a transfer will be quicker if converted into cash. Please contact us to discuss your particular circumstances.
What are the key facts to look for in a good QROPS?
Strong investor protection from a well established jurisdiction similar to the UK, investment protection, transparency of charges and tax efficiency.
My pension fund is substantial, what tax implications may there be?
A transfer to a QROPS will be a benefit crystallization event (BCE) and therefore will give rise to a tax charge if the amount exceeds the lifetime allowance (currently £1.8 million in the 2011 tax year). If your fund is in excess of this amount then please contact us for specialist advice.
Are there any circumstances in which I shouldn’t transfer to a QROPS?
Yes there are, although in most situations we have come across so far, as long as you are a non UK resident and intend to remain so the benefits to you can be immense.
If you have guaranteed annuity rates set many years ago when interest rates were much higher, this would be one such situation that would need careful consideration and advice.
Can I organize a QROPS myself?
No. QROPS providers will only take pension transfers through their appointed intermediaries.
We are appointed intermediaries; and as such we can provide you with all of the information, and the independent financial advice that is necessary for you to make an informed choice as to whether a QROPS is right for you.
We can also take care of all of the paperwork; making the transfer as easy as possible for you.