By Des Cooney
UK Pension Transfers to QROPS
The UK Government allows UK pension transfers to Qualifying Recognized Overseas Pension Schemes (QROPS) to be made free of tax. Their aim is to simplify the affairs of individuals leaving the UK on a permanent basis and to encourage them to continue saving in order to provide an income when they retire. These vehicles can receive your existing or ‘frozen’ pension into a recognised scheme in a jurisdiction outside of the UK. This overseas scheme will still be governed under UK pension rules and are obliged to report their activities to HMRC unless you have been a non-resident for 5 tax years.
What is the maximum and minimum value I can transfer?
There is no official upper limit to the amount of funds that may be transferred to a QROPS. In terms of the minimum value that most schemes are prepared to accept, it is important to make sure that the costs of using such a vehicle for the transfer of your UK pension do not out-weigh the benefits. Different schemes have different charging structures and as such may only be worthwhile if certain tax-efficient thresholds are reached. It is our experience that the transfer of a UK pension to a recognised oversea pension scheme is most cost effective in terms of charges when the transfer value is in excess of 100,000 GBP. In the last year however new providers have entered the QROPS market with competitive cost structures for transfer values of under 100,000 GBP. Providers use what is termed as QROPS ‘lite’ for such amounts.
Remember though that you can combine more than one pension to reach a higher value threshold. Therefore, whatever the value of your pension or other assets is, there is a solution for you.
What type of pensions can be transferred to a QROPS?
These retirement vehicles may be used to receive assets from any UK registered pension scheme, including:
- Occupational schemes (company pensions)
- Additional Voluntary Contributions (AVC)
- Small Self-administered Pension Schemes (SSAS)
- Self-invested Personal Pension Scheme (SIPPS)
- Personal Pensions
- Unsecured Pensions (income drawdown)
How long will such a transfer take?
UK pension transfers generally take 2-3 months to complete. The process begins with the completion of a letter of authority empowering your adviser to request information from the pension provider on current pension benefits and a transfer value.
QROPS – the UK pension transfer process
Your financial adviser will act as your facilitator during the transfer process. This role involves the gathering of necessary information, administration of documentation, and monitoring the progress of the transfer as it is processed by the scheme provider.
Are QROPS right for everybody?
In the case of Defined Contribution Schemes, arguments are generally in favour of the transfer of UK pension rights to a QROPS. However, the transfer from Defined Benefit Schemes often requires careful scrutiny and consideration before proceeding. There can indeed be disadvantages as well as advantages in transferring your pension to such a scheme. Giving ‘best advice’ involves not just telling you about the benefits on offer, but also warning you of any potential pitfalls. This is where our free evaluation service becomes invaluable in helping you source expert advice and guidance.