Pensions are confusing, but offshore pensions are even worse because they involve unfamiliar terms and rules that few retirement savers run into unless they are expats.
Here are some of the most common terms bandied about by expats and their financial advisers explained:
Qualifying Recognised Overseas Pension Scheme (QROPS) – A special pension for British expats and international workers who have spent time working in the UK which has seen them build up a pension fund.
QROPS are supervised by HM Revenue and Customs in the UK and were started in April 2006 to allow British pension savers easier access to their retirement cash if they retired to an EU country.
The pensions quickly caught on elsewhere and are now available in 30 countries.
Recognised Overseas Pension Scheme (ROPS) – The latest name for a QROPS. QROPS are ROPS, but confusingly not all ROPS are QROPS.
ROPS List – A list of all ROPS self-certifying they meet HMRC’s qualifying rules for offshore pensions. The list is published twice a month – on the 1st and 15th of the month. Occasionally, additional lists are published.
The list is relevant because retirement savers can only transfer pension cash from a UK pension or another QROPS to a pension on the current list.
Overseas Transfer Charge – A tax levied on some pension-to-QROPS and QROPS-to-QROPS transfers. The charge was introduced in March 2017.
The general rule is if you live in the same country as your QROPS is based or live in a European Economic Area (EEA) country and have a QROPS in another EEA country, you do not pay the charge.
Other exemptions apply, for instance, transfers to pensions of non-governmental international agencies or money going to an employer pension.
The charge is calculated as 25% of the amount transferred.
QROPS centre – A financial jurisdiction providing corporate and commercial services to residents and non-residents.
Australia is the place with the most QROPS pensions – around 44% of the 1,100 or so currently listed worldwide, followed by the Isle of Man. Together they account for around 60% of all QROPS.