What is a QROPS?

QROPS stands for Qualifying Recognized Overseas Pension Scheme and is a pension scheme that is offered to those who hold a UK pension plan but reside in another country. There are tremendous financial benefits if you plan accordingly. Why do you have to plan? That’s because you want to be able to access your pension plan when it is time. However, there is a restriction that you have to wait 5 tax seasons after being a resident of the UK before you can begin taking tax-free withdrawals. This can easily translate into a waiting period of approximately six years after you move.

As it stands, an individual can claim early retirement at age 50, but that is about to change. It has been entertained that the early retirement age is going to be raised to 55. Early retirement is usually granted because an individual must retire due to poor health or they are in a special occupation. After retirement, individuals may choose to live elsewhere, which is what QROPS (Qualifying Recognized Overseas Pension Scheme) is for. It allows an individual to receive their pension immediately as long as the pension assets are transferred to a registered QROPS (Qualifying Recognized Overseas Pension Scheme) pension plan in the resident country.

Why transfer your pension?

It is important that you take the pension benefits that you have worked so hard for and have them under your control. If you are younger than the retirement age, here are some things that you should consider:

- When living overseas, you can access up to 40% of your fund tax-free under the right circumstances before you reach the minimum retirement age. In terms of the right circumstances, that means that perhaps you are ill or you have an income situation that requires you to withdraw. If you request a withdrawal before the 5 tax season waiting period, it must be reported to the HMRC (Her Majesties Revenue and Customs) to be approved.

- Once you have reached the retirement age, you are allowed to use your fund’s balance for whatever you wish. This applies to whether or not you withdrew 40% prior to reaching retirement age.

- You are able to pass the fund on to any person you wish in the case of your death.

It is important that you transfer your pension so that you can access it when the time comes or access it prior to retirement age in case something happens that you need the money. This program was implemented by the HMRC in recognition of the many UK residents who were looking for something new throughout the world. They earned their money within the UK, so the development of QROPS (Qualifying Recognized Overseas Pension) ensures that those individuals still receive what is owed to them.

Benefits

As stated before, the pension money is tax-free. Other benefits include the fact that you are not required to purchase an alternatively secured pension or an annuity. You may also be concerned about the fact that a standard pension pays in sterling. Through QROPS (Qualifying Recognized Overseas Pension), the pension is paid in local currency. This means that there is no exchange rate risk. There is also no Lifetime Allowance Charge and you are able to invest your money as you please. All of these benefits make transferring your pension worth the time and the effort. The only downfall, it seems, is that there is some loss of protected rights. That includes any rights that were accrued under a defined benefit scheme or any rights that have been contracted out. However, if you move you cannot leave your money sitting in the UK, so it is in your best interest to have your pension transferred to where you are.

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