Qualifying Recognized Overseas Pension Scheme's or QROPS are pension schemes set up outside of the United Kingdom, which allows British expatriates to gain more control over their retirement investments and avoid the layer of restrictions and taxes imposed by the United Kingdom. It must be recognized by Her Majesty's Revenue and Customs (HMRC) and must be regulated by the country that established the pension scheme. The QROPS is required to be recognized for tax purposes, by the establishing country, even if the tax rate is zero.
This article outlines five of the biggest benefits to QROPS accounts.
Taxes
Since a QROPS can reside in a tax jurisdiction different from the pension holder, it is possible to base your account in a jurisdiction where lower tax rates improve fund growth. Pension benefit income will be taxed based on the pension holder's residency at the time the income is recognized. QROPS also eliminates the annuity or alternative secured pension (ASP) purchase requirement that is imposed when the pension holder reaches 75 years of age. UK Pension limits cash lump sums to 25% of the value of your pension. QROPS may offer higher tax fee options.
Freedom
QROPS allows investors to have the freedom of flexibility in their choice of investment options; they come in self-managed, collaborative or full managed packages. Pension holders can shop around in various stock markets, onshore/offshore funds, assets, and commodities that are not available to UK pension holders. QROPS are also exempt from the Lifetime Allowance charge and penalties. This gives the pension holder greater freedom to grow their fund to its full potential without the risk of breaching the UK pension threshold amount.
Beneficiaries
UK Pension holders lose much of their funds to UK Inheritance Tax. Two thirds of the pension could be automatically given to the spouse despite beneficiary delegations. Pension holders with QROPS do not lose those funds when they pass away. There is no need to purchase an annuity and reduced tax implications; therefore their entire fund can be passed down to account beneficiaries in the event of the pension holder's death. The spouse only receives funds from QROPS if they are the assigned beneficiary.
Currency Exchange Rates
QROPS is available in most major currencies and pension benefits are paid, in gross, to the pension holder in the currency of their choice. This eliminates the problems that occur with currency exchange rate fluctuation.
Confidentiality
Pension holders with QROPS are protected against business partners, creditors and ex-spouses. In some jurisdictions there may be protections against future creditors as well.
UK expatriates could greatly benefit from moving their UK pension fund into a QROPS fund. The flexibility and growth potential coupled with fewer tax implications make QROPS a profitable option for most expatriates. There are strict rules regarding property owned by these funds and there are tax issues that can arise when an expatriate returns home. Individuals seeking their most profitable options would be wise to seek out a QROPS specialist to review their particular financial situation and needs.
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5 Benefits of QROPS
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