|
  |
|
|
Qrops a Simple Definition
By David Black
“QROPS” stands for Qualifying Recognised Overseas Pension Scheme. It is a type of pension fund that most people with a UK pension scheme who are leaving the UK can transfer their pension pot into, without incurring a charge to UK income tax. The background to the system is that, before April 2006, anyone who left the UK and took their private pension with them had to pay a charge to HMRC of at least 25%. The exact rate depended on their tax code and circumstances. Accordingly, this impacted on the expatriate’s retirement plans considerably. However, April 2006 saw many amendments being made to the UK pension system. The government had decided that the regulatory framework had to be improved, and instigated a Pensions Simplification initiative to assist people who wanted to save to provide for their retirement. The introduction of QROPS was one of the measures in this initiative. HMRC keeps a list of approved QROPS funds on its website. In order to gain admittance to the list, the QROPS funds must be set up and run as pensions in a country that regulates and taxes them as such. The purpose of the regulatory requirement is to make sure that the member of a UK scheme who is seeking to transfer their funds can do so on the basis that they will be properly and honestly managed. From the taxation perspective, the QROPS funds must be taxed as a pension, but this requirement is met even if the QROPS’ host country has a very low tax rate for pensions and non residents – in places as low as 0%! Accordingly, members of UK schemes who intend to leave the UK find the idea of a QROPS an attractive one. Can anyone with a UK pension apply? There are a number of limitations on using QROPS. Firstly, it is only available for private pensions. You cannot transfer your entitlement to the state pension into a QROPS. Secondly, you must actually be leaving the UK. It is not permitted to transfer your pension into an offshore QROPS and withdraw an income free from tax. Thirdly, you need not be a UK citizen, but US citizens cannot use the schemes. Other than that exception, the rules apply to anyone with a UK pension, so foreign nationals who have worked in the UK and built up a UK pension fund during that time can use the provisions to transfer their fund into a QROPS and take the benefits tax free. And finally, you do not have to be retiring at the point of leaving the UK. Anyone who is emigrating from the UK can transfer their pension into QROPS. It is worth mentioning that the emigration has to be substantial. If the scheme member returns to the UK within 5 years from the date of the transfer, there might be a UK tax charge on the fund. What about inheritance tax? Inheritance tax planning is an important feature in the decision to transfer your UK pension into a QROPS. The list of HMRC approved QROPS is several hundred schemes long, so there is a diverse range of jurisdictions to choose from. Accordingly, the member can select a jurisdiction to host their QROPS that has a preferential inheritance tax treatment to the UK.
Unless a UK pension scheme member leaves funds to their spouse (or civil partner) or to a charity, there are limited opportunities to inheritance tax planning in the UK. However, some overseas jurisdictions permit the transfer of funds to named individuals after the pension scheme member’s death, without a charge to inheritance tax. Are there any other benefits of QROPS funds? Notwithstanding the Pensions Simplification initiative, there are a number of ways in which the UK system can be improved upon, which is why British expatriates choose to hold their pensions under a different regime. For example, the UK system insists that members of pension schemes purchase an annuity by the time they reach 75. This is a protectionist measure from the government to ensure that investors provide for their old age. Many investors, however, resent this sort of interference – particular if they had other plans for their pension fund.
When you look at the hundreds of QROPS funds available on the HMRC’s approved list, there are a number of schemes available in jurisdictions that have no such requirement, and instead allow investors to enjoy the fruits of their labours freely without prescribing how and when withdrawals are made. Aside from the issue of when withdrawals from funds can be made, QROPS schemes can also offer more flexibility about what the fund can contain. Some jurisdictions will even allow you to transfer property directly into the fund. Ask your QROPS adviser for specific information if this is an issue that concerns you.
|
QROPS
No reactions yet.
Please login or sign up to rate this intel.
The copyright for this content entitled "Qrops a Simple Definition" has been specified by the contributor as:
Creative Commons Attribution-No Derivative Works 3.0
Details 
This content may be copied and distributed (but not modified), as long as the original author is acknowledged with a link back to the content page.
If you use this content according to the license specified, you must link to the following URL:
http://qrops.qondio.com/
|
 |
|
This intel was contributed by qrops
|
May, 2012
2008
January, February, March, April, May, June, July, August, September, October, November, December
2009
January, February, March, April, May, June, July, August, September, October, November, December
2010
January, February, March, April, May, June, July, August, September, October, November, December
2011
January, February, March, April, May, June, July, August, September, October, November, December
2012
January, February, March, April, May
|
|
Not a member yet?
Qondio is a powerful network for making it online. If you have a website to
promote, we can help.
Sign up and get in on the action.
|
|
Welcome to Qondio! Discover the awesome power this network can deliver by going to our About page. Or you could skip straight to the Sign Up form.
|
|
