QROPS

What is a QROPS?

A Qualified Recognised Overseas Pension Scheme, or QROPS, is an overseas pension scheme that is run by a trustee(s) outside of the UK.

A QROPS can receive tax-free transfers from UK registered pension funds. They were first introduced to simplify moving UK pension savings abroad for those who choose to permanently relocate.

Is a QROPS regulated?

A QROPS is recognised by HMRC and allows UK Pension Benefits to be transferred into them. For a QROPS to become ‘qualified’ it must meet the criteria set by HMRC.

All UK pensions including a QROPS are regulated by the Financial Conduct Authority (FCA). Once a pension is transferred into a QROPS and a period of time has elapsed, your pension is regulated by the governing body of the jurisdiction that the QROPS resides in.

Why use a QROPS?

Transferring a UK pension to a QROPS can offer flexibility, tax and currency benefits.

A key advantage of transferring to a QROPS is your pension is not subject to UK rules and tax laws. Unlike a Self-Invested Personal Pension (SIPP) a QROPS can be held in a jurisdiction outside of the UK that is tax advantageous. This is why a QROPS is usually held in jurisdictions such as Gibraltar.

Under certain circumstances, it is possible to withdraw a tax-free lump sum if you are a Cyprus resident. If this is not possible, QROPS withdrawals and UK pension income(s) would be taxable in one of two possible ways:

1. A flat rate of 5% tax with a €3,430 allowance
2. Added to your annual income, charged at the relevant rate for your income tax scale (you pay 0% for an income under €19,501 but for an income above that threshold, the tax scale ranges from 20% to 35%).

If you are considering a QROPS be aware, other pension schemes offer a guaranteed minimum pension and other benefits that are built into the final salary scheme. These benefits are not transferable to a QROPS, only the actual value is. However, if you transfer into a QROPS, your pension is protected from exchange rate fluctuations as it will be paid in the local currency.