Guest blog post regarding qrops pensions for British expats.
Prior to 2006, ex-patriots of the UK would have to leave their pension behind and generally would be taxed both in the UK and the country of their residence. In 2006 The Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) Regulations 2006 (SI 2006/206), came into force. This allowed the transfer of a UK pension to an overseas recognised scheme.
There are a number of conditions to be met, generally that the scheme is available to those resident in the country in which it is established, and there is a system of taxation allowing tax relief in respect of pensions. In terms of choosing whether or not a Qrops scheme fits these conditions see a solicitor or IFA for more details.
Benefits of a Qrops?
The aim of a Qrops scheme is to transfer their pension savings to one overseas and thusly be free of UK tax (subject to the lifetime allowance, currently £1.8 million). It also offers users a host of other benefits.
One such benefit is that it offers investors complete control over your money. Qrops also mean that you don’t have to purchase a pension annuity. In the UK when a person retires they are required to purchase a pension annuity, which cannot form part of your estate upon death. Qrops are essentially an asset management plan which can be tailored to suit a person’s lifestyle and expectations.
In some instances, by transferring your pension, to a jurisdiction of your choosing, it could be tax free at source. By investing in a plan that reflects the balance between risk, growth and safe investments you can either guarantee your income or invest with it so it can grow and earn more money. Obviously such decisions have to be made very carefully and good independent financial advice should be sought before embarking on such a venture.
Flexibility of a Qrops
For ex-patriots who choose to adopt a Qrops scheme, it offers tremendous flexibility. This is because you get to choose the jurisdiction in which it will be based, ensuring that you receive the most beneficial tax advantages possible. Another benefit is, should the economy in which your Qrops is based should change, or your circumstances should change; then you have the option to move your investment to a fund that is more likely to yield the returns you are looking for.
Other Benefits of a Qrops Scheme
Another benefit that is likely to be of interest is the ability to withdraw a lump sum from your pension fund, tax free (depending on the jurisdiction of your account). Other smaller benefits are the extremely confidential nature of how off shore banks conduct business and higher fixed deposit rates.
Another key fact is there is no minimum amount needed to set up a scheme. Meaning it is available to anyone at all. However, the costs involved in setting up such schemes will be prohibitive to some and is really only of benefit when the funds in question are circa £25,000 or more. For serious financial benefits to be found, £100,000 should be invested, this allows a greater level of variable investments in your portfolio.
What Should I Do?
If your pension fund is still within the UK and there is a minimum of £25,000 in your fund then a Qrops scheme is definitely something you should consider undertaking. It is advisable to seek good financial assistance when choosing the scheme that is best for you, even if you undertake all of your own financial planning, due to the multinational aspect of this and the varying tax levels and benefits available, expert advice is invaluable.
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