Qualifying Recognised Overseas Pensions (QROPS)
There are many adverts on the radio currently about QROPS. But what are they and who might benefit from them? As the name suggests QROPS are to do with retirement planning and pensions. More specifically, UK based pensions. I appreciate that pensions can be pretty dull but they are important. So read on…
Whilst it has been possible to transfer pension benefits overseas for many years it was only in 2006 following changes in legislation that enabled those holding U.K. pensions to decide on the jurisdiction that the pension could be switched to. (Prior to this the jurisdiction of the pension and the individual had to be the same.)
This change brought about significant tax and financial planning opportunities for those who were no longer U.K. resident or who would be no longer U.K. resident in the near future. However this change also added an additional layer of complexity in what was already a complex area of financial planning. This is because an additional tax regime was brought into the equation.
When transferring your pension fund from U.K. you adopt the pension rules and regulations applicable to the new jurisdiction. For the new jurisdiction to be awarded the QROPS badge it must comply with a number of rules and regulations laid down by HMRC.
Changes in legislation in UK or the jurisdiction in which the QROPS is held can have a significant impact on your pension benefits. For example, the UK is now proposing significant changes to their pensions legislation which should result in more flexibility about when and how retirement benefits are taken.
Whilst QROPS still certainly have a place in retirement planning the number of people who would potentially be better off under this legislation has now reduced and so check that the adviser who is giving you advice on this subject is suitably qualified. Transferring out of a UK pension is an irreversible decision so you need to be sure before any action is taken.
I would also recommend independent tax advice on the treatment of UK pensions in the jurisdiction you are in and where you intend to retire as double taxation agreements can be complex and often cover payments such as pension income.
Please let me know if you have any questions comments or concerns.