Watch Out For The QROPS Investment Trap


QROPS investors wanting to boost the offshore pension funds by dabbling in risky high return investments need to think again.

Qualifying Recognised Overseas Pension Schemes (QROPS) allow a wider range of more flexible investment opportunities, but limits still apply.

In most cases, QROPS investors can pick from many more bonds, funds, commodities and currencies than those offered by UK onshore pensions – even SIPPs.

Taking an Australian QROPS as an example, the assets transferred in by an expat are termed the ‘taxable asset transfer fund’.

QROPS rules says fund managers cannot invest this money in any investment which would not have been allowed if the money had remained in a UK pension.

Disallowed QROPS investments

If the money is invested in one of these disallowed investments, then a tax charge is due – typically 40% of the investment value plus a surcharge of 15%.

The list of disallowed investments covers a range of risky assets:

  • Residential property – including a home for the retirement saver or buy to let homes
  • Holiday homes
  • Timeshares
  • Fine art
  • Antiques
  • Fine wine
  • Jewellery
  • Boats
  • Cars
  • Helicopters

The common thread with these assets is that they are investments that can benefit the pension saver and receive tax relief.

The watchword is even if a UK pension is transferred to an Australian QROPS, the tax-relieved funds cannot be invested in assets forbidden by UK pension rules.

Investments for delisted Australia QROPS

This is another case of watching both UK and Australian rules for QROPS anomalies – hundreds of Australia QROPS were blacklisted by HM Revenue & Customs (HMRC) in the UK for offering access to their fund for retirement savers aged under 55 years old.

Even investing in a QROPS in another financial centre while living in Australia eases the investment rules.

Another point to note for Australian QROPS investors is that even if they have cash tied up in a delisted QROPS, the taxable property rules still apply to the fund.

Although QROPS offer an overall improved investor experience over UK pensions, strict rules still govern how tax relieved cash is invested.

Beware so-called QROPS advisers offering high return, high risk investments as part of a transfer, because they are likely to be taboo for retirement savers.