Do You Understand How QROPS Work? What You Need to Know
QROPS are Qualifying Recognized Overseas Pension Schemes that are recognized by HMRC (Her Majesty’s Revenue and Customs. These schemes are similar to the UK pensions and therefore enable you to transfer your UK pension to an offshore pension.
QROPS are a result of the European Union which was agreed to enable the public to move savings from one country to another. Before you jump and decide to transfer your pension, it’s important to bear in mind that pensions are subject to tax and extensive regulations. In 2006 the United Kingdom regulated which of the overseas pension schemes were acceptable based on their comparison to the UK pension schemes. Many of the non-EU countries were included as a result.
There are numerous benefits to QROPS, which you may want to look into before making any final decisions on how to manage your UK pension moving forward.
The first benefit you will find is that you can reduce your taxable income with QROPS. All UK pensions are taxable on any portion that exceeds the lifetime allowance threshold, also known at LTA. Currently this is £1 million with fifty five percent taxable on lump sums and twenty five percent on any annual incomes. Once you move your funds to QROPS, you will find that you are no longer required to pay LTA making them exempt from UK income tax as a result.
Some of the QROPS available provide a thirty percent tax free lump sum withdrawal, where in the United Kingdom there is a standard of only twenty five percent tax free amount. QROP are required to calculate the pension incomes according to the GAD, Government Actuary Department. Bear in mind that some of the QROPS do make payments in currencies other than Sterling.
Flexible and Mobile Investments
QROPS provide clients with investment and flexibility that is similar to those in the UK known as SIPPS, Self-Invested personal pensions. They are appealing to those that want to consolidate a number of pension pots.
If you’re wondering if you quality for QROPS, then you will be pleased to know that if you have already relocated to another country and you intend to retire there, then QROPS may be the ideal choice for you. These pension schemes are subject to a five year rule, which means that the benefits become fully available only when you haven’t been a UK resident for five years. In the meantime, your QROPS must match the UK pension conditions and in the event you decide to return to the UK, you will find that they are subjected to UK income tax as a foreign pension.
Why You Should Speak to a Financial Advisor
Financial advisors can provide you with the financial advice and support that you need when identifying if QROPS are the right step forward for you when you have moved to another country or are in the process of leaving the UK on a permanent basis. Bear in mind that there isn’t only one QROP provider, which means that you want to speak to a professional who can guide you and direct you to ensure you make the best financial decisions for your future.
Don’t make any decisions without speaking to a professional who can assist you, identify your personal needs and future goals and then work with you to find the right QROPS that will financially benefit you moving forward.