Making The Most Of UK Pensions - The QROPS Solution For Expats

Since 2006, people with UK pensions who are, or who will become, non-resident in the UK for tax purposes have been able to move their pension benefits to a Qualifying Recognised Overseas Pension Scheme (QROPS).

In addition, UK pension benefits tend to die with the member and the fund cannot be passed to beneficiaries. Yet these issues can be avoided by transferring the private pension out of the UK.

What is a QROPS?

A QROPS scheme allows UK non resident individuals to transfer their pension overseas free of tax (unless it exceeds the current £1.8m lifetime allowance). It must meet certain criteria set out by HM Revenue and Customs (HMRC) and can offer significant taxation and investment advantages, allowing many UK pension holders to get more out of their fund.

The main advantage of a QROPS is that unlike a pension fund in the UK, there is no tax on death. Individuals who have transferred their pension to a QROPS will be able to pass on their pension fund free of tax and ensure that their loved ones continue to be looked after in the event of death.


Flexible and efficient

A QROPS offers the potential for a client to choose from a wide range of investments. Many schemes however will restrict the investment choices available, potentially restricting the individual to funds that attract higher annual management fees. It is also important to note that some QROPS providers accept investments that are not allowed in a QROPS, e.g. residential property. These are therefore very important considerations when choosing a QROPS provider.

STM Group QROPS accept all allowable investments and certainly all investments that would have been allowed in a UK pension scheme.


A world of choice – location does matter

To be effective, a QROPS must be held somewhere that works most efficiently with the taxation system of the country in which the individual resides i.e. in a country with a double taxation agreement or another EU jurisdiction (for those expats now residing elsewhere in the EU).

Historically, Guernsey was the only option for expatriates transferring their pension scheme, irrespective of their requirements or personal circumstances. Now QROPS jurisdictions are established worldwide, offering a far wider range of bespoke solutions. If an individual lives in a country within the EU, there are potential tax implications on exporting their UK pension to a QROPS jurisdiction outside of the EU.

Spanish residents for example are best to choose a QROPS from within the EU. In this instance a Malta QROPS would have more advantages than one from Guernsey, Jersey or the Isle of Man A QROPS within the EU is an important issue as far as the Spanish tax authorities are concerned.


A wise move

Recent innovations have also meant that the pension holder can now avoid large transfer fees previously charged to expatriates wanting to move their QROPS to another jurisdiction.

Retired expats who relocate to another suitable jurisdiction can now take their pension with them fee-free, with a portable QROPS. Available from providers with HMRC-approved QROPS available in multiple jurisdictions, pensions can be moved between several countries without incurring additional fees. With transfer costs potentially running into the thousands, it represents a significant saving. A sensible choice for expats, a multi-jurisdictional QROPS provides the freedom to move the scheme around without eating into the funds whenever a transfer is required.

Hidden pitfalls

It is important to get the right advice so that UK private pension holders can choose the most appropriate QROPS jurisdiction; one QROPS does not fit all. Legislation in different jurisdictions or changes in the tax regime where the individual lives or where their QROPS is located need to be factored in, as well as when is the right time to make the transfer.

Choosing a fully independent and impartial QROPS provider is the key. An IFA might only offer a scheme which provides them with the highest level of commission, this may not necessarily be the best QROPS to suit the individual needs of the client, Choosing a truly independent multi-jurisdictional QROPS provider can help to avoid hidden commissions, hefty annual charges and the prospect of funds being restricted to certain investments.

The expat solution

Setting up a multi-jurisdictional QROPS is a sensible choice for expats, providing the freedom to move the scheme around without eating into the funds whenever a transfer is required. As cross-border QROPS schemes look set to become far more common in years to come, acting now could result in immediate savings for retirees.

When choosing the best jurisdiction for your QROPS, it is crucial to seek advice from experts. STM Group (www.stm-qrops.com) offer portable QROPS in countries such as Malta, the Isle of Man, Guernsey, Switzerland, New Zealand, Jersey and Gibraltar, and provide independent advice on all aspects of holding and managing an overseas pension scheme. With offices in multiple jurisdictions, the STM pensions team offer a unique and compelling choice for anybody looking to transfer their UK private pension to a QROPS.

To find out more about QROPS, please contact STM Group, the leading HMRC approved QROPS provider www.stm-qrops.com; e-mail pensions@stmfidecs.gi or call 00350 200 51356. Alternatively, to read more about our Malta QROPS please visit www.stmmalta.com

Contact Information

Iain Farr

Group Head of Marketing

STM Group

Contact via E-mail