The last few years has seen a significant number of UK residents working and settling outside the United Kingdom. South East Asian countries are popular destinations. Nearer to UK, Europe, and the Middle East, particularly Dubai is attracting numerous expatriates. QROPS or Qualifying Recognized Overseas Pension Scheme now allows expats who are overseas and who hold a UK pension, to transfer these pensions to schemes overseas.
With changes in the UK pension schemes, UK expats between the ages of 50 and 55 were unable to access their pension benefits. Previously, UK expats were able to draw the pension after the age of 50 giving many expats an opportunity to supplement the income while living and working outside UK. Further, it was compulsory that individuals purchase an annuity by age 75.
With QROPS only overseas schemes approved by HRMC (Her majesty's Revenue and Customs) are considered. In taking up QROPS individuals need to ensure that they would be resident outside the UK for at least five years after the pension has been transferred. Failing to do so, will result in an individual being taxed on the pension funds transferred overseas.
The major benefit of converting a pension to a QROPS is to receive payments without deduction of UK tax. In addition, the expats are not required to purchase UK annuity. Another advantage is the ability to invest in different currencies or investment schemes where the expat is living and thus benefit from any exchange gains or appreciation of the investment.
In the event of death, investing in QROPS allows an individual to transfer his pensions to a nominated beneficiary without having to pay any inheritance tax in the UK. However, participating in QROPS also carries certain risks. Most schemes have no capital guarantee and are subject to fluctuation in the investment market. Where the investments are made in different currencies exchange rate variations could affect the final amounts derived from the pension.
Expats
QROPS and Expats
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