If you are planning to retire overseas, a QROPS pension is a viable option for anyone, regardless of their financial worth or country of residence. Most UK pension funds can be transferred into a Qualified Recognized Overseas Pension Scheme (QROPS), with the exception of state pensions. The tax advantages and flexible investment options are offering ordinary people to put their pensions in a significantly better financial path. UK taxpayers who plan to move outside the UK or have already moved qualify to transfer their pension to a QROPS pension. International workers returning home also qualify to move their UK pension funds.
Investing your pension fund into a QROPS fund is more than just an opportunity to reduce taxes. There are other benefits including flexibility of investment types, options regarding currency exchange rates, and protection from ex-spouses and creditors. Individuals can take control of their pension investments and open themselves up to currencies and commodities not available to UK pension holders.
There are regulations on QROPS providers which serve to protect even small investors. All QROPS must be registered with Her Majesty's Revenue and Customs to certify it's compliance with QROPS rules. QROPS providers insist that all investors seek independent financial advice, reducing the risk of conflicts of interest. The marketplace has regulated, independent, whole-of-the-market advisers available to assist anyone considering transferring their pension.
While financial worth is not a factor that determines eligibility in transferring your pension into a QROPS fund, there are significant costs associated with the process. There are transferring fees and ongoing fees that need to be evaluated and considered thoroughly before making the jump to transfer pension assets into a QROPS fund. Three main charges should be calculated and weighed against the benefits before choosing a QROPS provider (charges may vary). The three charges are: setup cost, annual management charge, and underlying fund charges. The larger the funds to be transferred the lower the relative cost will be. It is possible that smaller pension account holders may find the fees involved with establishing a QROPS pension may outweigh the benefit of the fund.
International workers who have earned a British pension planning on returning home or moving to another country may benefit from transferring their current British pension funds into QROPS account. Many UK pension accounts experience negative growth and upon death half or more of the fund could potentially be returned to the life company – not the pension holder. QROPS eliminates this risk.
It is also worth mentioning that generally, the amount required for a basic QROPS transfer is roughly £25,000. It is possible to combine more than one pension fund in order to achieve this amount; however, funds lower than this tend to have costs that outweigh any benefits.
Two other requirements that might alter your decision to transfer your British pension into a QROPS pension is the five-year rule and the lump sum restriction. The five-year rule states that for the first five years any cash withdrawals must be reported to HMRC. After that time, lump sum cash withdrawals cannot exceed 30% of the value of the fund.
British expatriates and international workers with British pension funds could benefit from seeking the advice of a qualified and regulated QROPS adviser. They are required to be independent from the QROPS providers and will provide detailed cost analysis specific to your financial circumstances and retirement needs.
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