If you are a UK expat or one of those people who look forward to retiring abroad you must be quite concerned about how to manage your personal pensions. However, with the introduction of QROPS (Qualifying Recognized Overseas Pensions Schemes), there is little to worry about your retirement plans.
HMRC’s Role in the QROPS System
QROPS was introduced by Her Majesty’s Revenue and Customs (HMRC) as an attempt to allow investors possessing UK pension funds to transfer their pension schemes to another country where they wished to relocate themselves. The main providers of this pension scheme included insurance companies, banks as well as various trust institutes. HMRC established a set of rules and regulations that was to be followed in the QROPS system. It also required the investors to report to HMRC during the first five years of departure from the UK, after which no reporting is required.
Before you decide to transfer your pension scheme into a low cost QROPS keep in mind that only certain pension schemes have been approved by the HMRC to qualify as QROPS. If you attempt to transfer your funds to an unapproved pension scheme you will have to bear a penalty for it. Besides this, an investor can not get the QROPS if he has already bought an annuity or receives Final Salary Pension payment. Moreover, you should also evaluate your financial position and only then opt for the QROPS.
Seeking the Advice of an Independent QROPS Specialist
Since the decision to transfer to QROPS is a critical one, therefore, the best thing to do is to seek the help of an independent financial adviser. Nowadays, special pension advisory companies have been established which are regulated and recognized by the Financial Services Authority (FSA). They will give you the best advice after going through your details and requirements.
In order to be able to get your pension funds transferred to QROPS, either you must be living outside the UK or you should have a plan to move abroad in order to avoid the UK tax regime. Nevertheless, the basic idea that motivates many people to go for the QROPS is that their pension funds are no longer taxed in compliance with the UK laws.
However, they will be entitled to follow the jurisdiction of the host country which depends upon the investors’ choice. You should thoroughly analyze the tax regime of the host country to identify whether it favors you or not and only then go for the final decision.