QROPS (Qualifying Recognised Overseas Pension Schemes)

Any member of a UK registered pension scheme (whether UK resident or resident abroad) has the potential ability to transfer his/her benefits to an overseas pension scheme - provided that the registered pension scheme rules so permit and the rights do not derive from an insured annuity contract.

Normally, a request to transfer pension rights will be prompted by the member residing or intending to reside abroad and by the desire to ensure that all financial resources are coordinated into formats which reflect and optimise the new lifestyle.

Unless pensions transfers from a UK registered pension scheme are made to an overseas pension scheme which has QROPS status, HMRC will treat the transfer as “unauthorised pension payments” and, as a result, substantial tax penalties will be incurred. HMRC maintain a list of approved QROPS in a considerable number of territories across the world - not all of which will be capable of receiving such transfers.

Clearly, moving pension resources out of the UK could lead to tax abuse. As a condition of QROPS approval, the QROPS administrators accept responsibility, during the first five full fiscal years of non-UK residence, to monitor, ensure and enforce that all transactions within the QROPS essentially mirror the UK rules – otherwise heavy UK tax penalties can be applied.  At the end of this 5 year period, the relevant members maintain responsibility - and personal liability - for ensuring that residual ongoing HMRC requirements are met.

It is therefore, very, important to ensure that both the QROPS provider and the members are aware of HMRC requirements, as emerge from time to time – and the ongoing role of a skilled UK adviser is paramount. By contrast it is also essential to ensure that continuing monitoring takes place both of local requirements in the member’s territory of residence and in the domain where the QROPS is located. New local conditions and regulations may dictate a review of structures.

Moving pension resources to a QROPS does not necessarily automatically maximise returns for members! For example, drawing benefits direct from a UK pension scheme in a territory which has a favourable double tax treaty with the UK - may on occasion produce better benefits than a QROPS would provide. In addition, in such cases, the control and flexibility, available from a UK scheme, may be retained.

Many potential QROPS members will have enjoyed the considerable investment freedoms that UK schemes afford –as well as the high degree of personal control allowed. These are rarely found in QROPS, where local conditions dictate additional restrictions control passes to offshore independent trustees – who will often have discretion regarding the destination of death benefits. Clients will have inevitable and understandable fears about the security of their pensions resource.

Nigel Sloam & Co will provide independent, untied advice on QROPS selection overseas, where appropriate. We will also advise as to when the QROPS route is inappropriate! The firm actively researches QROPS which replicate, insofar as is possible, the best features of our UK SSAS’s and SIPP’s. In conjunction with reputable QROPS providers, the firm provides ongoing advice as to the optimal use of entitlements under such arrangements.