If you are thinking of transferring your pension into a QROPS, then it would be beneficial for you to consult a QROPS specialist.
QROPS stands for Qualifying Recognised Overseas Pension Scheme. It is a scheme into which you can transfer a UK pension if you are living or working abroad and you plan to draw your pension outside the UK.
It is a specialist product which can have significant tax and investment benefits for those who are planning to work and retire overseas. However, there are regulations and restrictions on what type of scheme you can transfer your UK pension into.
If you have a UK Final Salary (Defined Benefit) scheme, then UK pension regulations requires you to take advice from an authorised firm who has special permission to operate in that area. There are also restrictions on the type of pension which can be relocated via a QROPS. If you have a private or employer pension, including one which is a Defined Contribution (Money Purchase) scheme, you need specialist advice on how to make the transfer.
QROPS can be complex and the rules concerning transfers differ from country to country. There are differing tax regimes and legal frameworks and different levels of investor protection and compensation. All of these issues need to be taken into account when deciding where and how to make your QROPS transfer.
They are all matters which require the expertise of a QROPS specialist.
How a QROPS specialist can help
People have different assets, income levels, lifestyle objectives and reasons for moving abroad. There is no “one size fits all”. How and where to make the transfer depends on your individual financial arrangements, the type of pension scheme you belong to, where you are planning to relocate, and what level of income you will need in retirement.
Working out whether you should make the transfer into a QROPS can only be decided when a specialist QROPS provider has met with you, received information from your existing pension fund and explained the options available.
Different countries and jurisdictions have different tax rules. Some of these will have more favourable tax laws than the UK. You will also need to take into account your own personal and financial liabilities and whether it will be beneficial to leave the UK and make a QROPS transfer.
If you are a member of a final salary (Defined Benefit) scheme, then the UK financial regulator requires you to receive pension transfer advice by a pensions transfer specialist before going ahead.
Laws and regulations in different countries
Not all overseas schemes are recognised by the UK government, which means that they are ineligible for you to use for a QROPS transfer.
Generally speaking, the scheme needs to provide similar benefits that you would have received had you decided to stay in a UK pension.
Not all jurisdictions have robust investor protection – your QROPS specialist will be able to advise you on the countries where protection is comparable to the UK.
According to the Pension Advisory Service, to qualify as a QROPS the scheme must meet the requirements set by UK tax law and must satisfy criteria involving taxation, regulation and certain scheme conditions.
There could be a number of benefits in transferring into a QROPS, but your primary concern is ensuring that you are able to fund your retirement.
For ex-pats living abroad who want to draw their pension outside the UK, it may be more tax efficient if they make a QROPS transfer. They can also enjoy the stability of being able to take their pension in a currency other than sterling.
Another attractive feature of a QROPS is that there is no obligation to purchase an annuity. You can take income in a flexible way. By making a QROPS transfer, you may have greater opportunity for growth and investment returns.
On your death, you are able to pass the remaining fund to your beneficiaries.
Protecting your future income
When you decide to draw your pension, your primary concern will be making sure that you don’t run out of money in retirement.
That is why it is important to receive specialist advice from a QROPS expert who can explain how to ensure that your future income is protected. Depending on where you plan to make the QROPS transfer, you will need to consider that country’s tax rules, estate planning issues and regulations governing drawdown and income.
You have saved for a lifetime to build up a retirement fund and it is important that you safeguard your income for the future.
A QROPS specialist will be able to advise you on which types of investment are most suitable, depending on the prevailing economic climate and what level of risk you might want to consider.
For more information, get in touch with your QROPS specialist at bdhSterling.