QROPS Rules For UK Pensions
QROPS rules are the rules which determine whether or not an overseas pension is given the status of Qualifying Recognised Overseas Pension Scheme (QROPS). When expats are considering transferring their pension from the UK to an overseas pension many concentrate exclusively on these rules. However, as we show below, there is much more to making a successful QROPS than just the qualifying rules.
Successful QROPS
For a QROPS to be successful for YOU and your family you must take into account all of the following elements. If you do not receive proper advice on ALL these elements BEFORE you move your pension the chance of you having a successful QROPs will fall.
Rules
Investment Choices and Options
Ongoing service
Retirement
Death
Rules
The Rules required to meet the Qualification standard are well documented elsewhere. By the time you are being offered a
QROPS it will be on the UK HMRC list and will therefore be acceptable. However, even though they are accepted you should be aware of two issues. One is the jurisdiction of the QROPS. Is it a QROPS in Hong Kong, Singapore, Guernsey, New Zealand or Isle of Man QROPS? There are many other countries where QROPs are based . You do not have to live in the same country as your QROPS. So for example, in Spain you can have an Isle of Man QROPS.
Some of these countries with QROPS are currently being investigated by the UK HMRC. Singapore has had it’s QROPS status removed. Others may follow.
Different QROPs countries also have variations. For example, with a Isle of Man QROPs you can take a 30% lump sum payment from your QROPs on retirement as opposed to 25% in many other countries.
The second issue and the main problem area for QROPs has been the marketing of the ability to transfer on your pension from QROPs to an investment where you can take all the fund as a single payment. Do NOT expect to be able to “pension bust” by moving to a QROPs. It is a pension after all. The main advantage of a QROPS is that you do NOT have to buy an annuity when you retire. This means any money left in your pot after your death can be passed on to your family.
Investment Choices and Options
Between now and when you retire economic circumstances will change. What is a good investment for one part of the economic cycle will not be such a good one in other places in the cycle. It is vital that you have sufficient flexibility to choose from investments that are going to be right for you. For example, as you approach retirement you may wish to move your investments to lower risk. In retirement, you will want to concentrate on getting income from your investment (your pension) . A good QROPS should give you access to over 11,000 funds, generally considered to be enough for most people!!
Ongoing Service
This is another factor which is overlooked at the start when people move their pensions into a QROPs. In addition to the change of economic circumstances mentioned above, what happens if your circumstances change? Say you move countries. Perhaps you will even return to the UK. What do you need to do to start taking your pension? In all these circumstances, and many more, you will need ongoing advice. Check this will be available to you and how it will be provided.
Retirement
When you retire you will be given a number of options. These will include how much of your fund do you wish to take up to a maximum of 25% (30% in Isle of Man). You will be given the option to take withdrawals from your investments in your QROPs ranging from zero to 120% of a figure provided by the Government Actuary Department (GAD). This maximum figure is calculated using interest rates at the time of retirement and your age amongst other factors. Sounds a bit technical but basically you will have a great deal of flexibility. A good QROPs will also allow you to vary your income in the future.
Death
Unfortunately all QROPs will have to deal with this issue. Make sure that yours allows your Spouse to continue taking your FULL pension. With many conventional pensions the widows / widowers pension is only half the main pension, or less. You should also be told what happens if the spouse wishes to take the remaining pension fund as a lump sum. Also make sure that the QROPs you choose has the option to pass on the pension fund to your children and / or grandchildren as a pension. This facility is often known as a family pension.
Finally, as with many aspects of pension planning whilst there are rules, how these rules apply to you is the important factor in the decision making process. Yes you need an adviser who can list the rules but to make a successful QROPs you need someone with the knowledge and experience to help you understand the impact of these rules on you and your family. For that you will need an experienced, qualified and regulated adviser who understands that you are an individual not just a rule book!!
If you have a UK pension, live in Europe and would like to talk to a suitable independent financial advisor please email QROPS enquiry
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