Qualifying Recognised Overseas Pension Schemes (QROPS)

What in the world is this mouthful you may ask. This is a specific type of pension available to former UK tax resident - if you have worked in the UK, paid tax and are now living outside of the UK this will be interesting for you, and potentially highly beneficial.

What does this mouthful means?

Qualifying Recognised Overseas Pensions Scheme (QROPS) are a relatively new invention. In April 2006, the UK tax authorities approved that former British tax resident and British Expatriates could move their pension benefits to QROPS. The authorities improved their stand early this year, and since then, a steady increasing number of expat - and advisers - are seizing this opportunity.

What are the benefits of a GROPS?

• No UK income tax on the pension benefits after you start drawing (whereas most UK pensions are taxed at source – even if you are resident overseas in most cases)
• You have the option of draw-down directly from the fund  (means you don’t have to lock everything into an annuity)
• Upon death, the fund balance can be passed to your realatives - Spouse, children, etc.
• You can be actively involved in the management and strategy of your pension fund at all times
• Any death benefit to your estate can now fall outside UK IHT
• You can combine multiple pensions into one single scheme, thus saving considerable admin costs
• Tax Free cash element can now be 30% of the fund, subject to the jurisdiction for the QROPS (instead of 25%)
• You can take benefits from age 55 (instead of 65)

Sounds great doesn’t it?

Yest it does. It actually is one of the few expatriate tax schemes which is really popular with everybody. The benefits are important, and most can benefit from it. But you still need to go through your estate to evaluate whether it is beneficial to you or not.

Once instance where you may be better of staying in the British system is when you have subscribed to a pension plan with benefits such as guaranteed annuity rates which were subscribed when interest rates very high - or at least much higher than lately.

Should you wish more info, do not hesitate to drop me a line