If you are an expat and want to maximise your retirement income, then you have to consider a Qualifying Recognised Overseas Pension Scheme (QROPS).
QROPS are offshore pensions designed for British expats and come with a package of tax and investment features that are unavailable in the UK.
Although official figures are hard to come by, the estimate is at least £2 billion has been shifted from UK pensions to QROPS since they were established in 2006.
These offshore pensions offer the solution to specific financial problems for expats, such as estate planning, sheltering £1 million plus funds and minimising income tax.
QROPS benefits for expats
Here’s a run-down of some of the benefits expats may not know about:
- More tax free cash – QROPS typically pay out a 30% tax-free lump sum compared to 25% offered by a UK pension
- No lifetime allowance or contribution cap – Although the lifetime allowance is applied to any fund transferred into a QROPS, once inside the pension, a fund can grow without limit
- Flexible investment opportunities – UK pensions have investment restrictions, but QROPS do not. Retirement savers have a much wider range of funds, bonds, markets and currencies to choose between
- No income tax on pension payments – Expats pay income tax where they live, not where the QROPS pension is based
- Worldwide coverage – If the country where an expat lives has no QROPS provider, look to Malta, Gibraltar or the Isle of Man
- Flexible access – Pension freedoms are limited, but are available from some Malta QROPS
- No currency exchange juggling – QROPS pay out in a number of world currencies direct to local banks, eliminating exchange transfer costs
- Pass on unspent funds to loved ones – QROPS pensions remain outside UK inheritance tax laws and can be passed to spouses and loved ones in full, and in some cases, with no tax liabilities
- Flexible plans – QROPS are not just for the wealthy. QROPS ‘lite’ also offer packages for smaller pension pots
How to transfer your pension to a QROPS
More than 1,250 QROPS are available from 42 financial centres, so matching a retirement saver’s precise requirements with the right offshore pension means working with a suitably qualified IFA to tailor a personal plan.
Although UK IFAs have been ordered to include a QROPS option in their pension planning, few have the in-depth experience of dealing with offshore pensions that allows them to give spot-on advice.
Always check your IFA is regulated and qualified to give QROPS advice in the country where you live or intend to retire.