Thursday, September 20, 2012
QROPS - The Pension That Travels With You
When you have earned the opportunity to retire abroad it makes sense to ensure your pension goes on working just as hard as you did. A Qualifying Recognised Overseas Pension Scheme (QROPS) does just that by allowing you to take your UK pension with you and invest it in the fund that best suits your needs.
A QROPS frees a pension from many of the restraints that surround it in the UK and can offer huge financial benefits if planned and executed efficiently. Essentially a QROPS pension transfer allows anyone living abroad or planning to move abroad in the near future to put their UK pensions, free of UK tax, into any offshore fund approved by HM Revenue and Customs.
Control and flexibility
You control not only how it is invested but where it is invested, allowing you to choose the jurisdiction with the most beneficial tax system for your circumstances. In some cases this can mean paying no tax at all on your retirement income. A QROPS is also very flexible with a range of investment options that allow you to balance factors such as risk level against the growth and income you expect to receive. And that flexibility extends through the life of the pension, allowing you to take advantage of changes in your situation or in the economic climate.
The key difference between a UK-based pension and a QROPS is that you retain ownership of all the money in your pension fund. You do not have to buy an annuity on retirement, although you can if you wish. Instead your money is invested directly in a QROPS under an asset management plan geared to suit your requirements. And in the event of your death all unspent pension funds can be left to your beneficiaries without being taxed at source.
A QROPS is suitable for anyone living abroad with a UK pension, both expats and people from other nationalities who retire to their home countries. There is no set figure for the amount required to set one up, but experience has shown that an initial investment of over £25,000 is needed to make it worthwhile. It really comes into its own, however, with a pension fund exceeding £100,000 which will allow you to place you investment with an approved offshore portfolio bond of your choice.
As with all financial planning it is essential to seek professional QROPS advice before making any decisions. An independent financial adviser will consider your circumstances and be able to advise on whether a QROPS is right for you or whether an alternative plan such as a qualifying non-UK pension scheme (QNUPS) would be a better option.