A quick guide to transferring your pension overseas
First published 31 October 2013 • Updated 13 March 2018
Retiring abroad is a dream for many reaching retirement. But how do you access your pension? Independent financial adviser, Jeff Miller gives a quick overview to the pros and cons of QROPS.
What is QROPS?
A qualifying recognised overseas pension scheme.
Who is it suitable for?
A non-UK resident that has one or more UK pension plans that they intend to take benefits from, now or in the future, and does not wish to purchase an annuity.
Can I transfer to a QROPS if I am a UK resident?
Yes, but there are no apparent benefits in doing so.
Why not leave the pension plan(s) in the UK?
Taxation is the main driver.
- QROPS can provide income benefits at a lower tax rate than the UK.
Income may be subject to local taxation in your country of residence
- With a UK pension plan, there is a tax charge of 55 per cent levied on any lump sum death benefit. This would not apply to a QROPS providing that the plan holder was not a UK resident at that time, or earlier within the tax year of payment, or in any of the five previous tax years.
Any lump sum death benefit may be subject to local taxation in your country of residence
Any other advantages?
A QROPS can often pay a higher level of income than a UK drawdown or annuity, typically up to 20 per cent more than a standard UK annuity.
A QROPS can pay part of the fund as tax free cash, as can a UK pension plan.
You should expect to pay slightly higher charges than for a UK pension plan. Charges tend to be of a fixed nature, so a QROPS transfer may not be suitable for smaller funds.
It is crucial that the plan holder understands the tax regime in his or her country of residence as this may obviate any benefit gained from a QROPS.
What are the UK reporting requirements?
Most payments made by a QROPS (that is derived from a UK transfer) are reportable to HMRC unless the payment occurs 10 years or more after the date of transfer and the plan holder is not UK resident at that time, or earlier within the tax year of payment, or in any of the five previous tax years.
You should always seek professional advice before transferring any pension plan. Find an specialist pensions adviser in your area.
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