Looking For QROPS Advice?
The following QROPS advice guide for Expats is produced by Lawsons Equity, a fully regulated, independent financial advisory company that specialises in UK Pension Transfers & QROPS advisory services. We offer independent advice if you are located in the UK, Malta, Italy, Spain & Portugal or if you are thinking of moving to any of these countries.
When Retirement Is Imminent...
When we are working throughout the majority of our adult life, it’s important that when we reach an age at which we want to or have to retire, and our work levels reduce or cease either because we want to work less and enjoy our ‘free’ time, or perhaps we have to reduce our work for health reasons or under unfortunate circumstances where we are forced to retire.
It is at this point in our lives that our retirement savings must "go to work" to sustain our efforts (rather than us) to support the retirement fund!
However, the key here is that we planned in advance for that particular juncture in our lives in order that the degree of change we want in our lifestyle and work effort, and the cost to support these can be adequately financed by your pension savings for you life expectancy (current people reaching 65 have a 50% chance to live to 85 and 10% chance to live to 95).
So it is important that the retirement money is already in the correct type of structure to perform as you need it to and for as long as you expect to need it.
Pension funds are created in the UK through a number of routes such as an occupational pension, personal pension, SERPS pension and many more.
In the following article we will cover everything you need to know about Qualifying Retirement Overseas Pension Schemes (QROPS):
- 2006 UK Pension Tax Simplification
- QROPS Explained
- How Can You Benefit From The 2006 Pension Reform
- Is QROPS Right For You?
- Who Is Eligible For QROPS?
- Overseas QROPS Transfer Charges
- Benefits Of QROPS
- Do You Need To Leave UK Forever To Qualify For QROPS?
- Current QROPS Provider List
2006 Pension Tax Simplification
Since April 2006 ‘A Day Simplification’ (not particularly simple) the pension industry in the UK has gone through a continuous process of evolution and change.
Lawsons Equity has the personnel with extensive knowledge, including the latest UK pension qualifications, and with many years of experience both in the UK, Malta and other European jurisdictions.
With this in mind, our clients have been able to take advantage of the depth of knowledge available at Lawsons Equity Limited in order to plan accordingly in a precise manner in terms of retirement provisions.
This includes the current condition of the existing UK pension plan or plans, what options are available to them and the benefits that will come hand in hand with a potential transfer.
QROPS Explained (Qualified Retirement Overseas Pension Scheme)
Qualifying Recognised Overseas Pension Scheme, QROPS , in simple terms is a scheme in a tax jurisdiction outside of the UK, into which you can transfer your current pension plans.
In 2006 there were numerous jurisdictions around the globe with QROPS schemes available, however due to a number of them abusing the ‘ spirit of pension law’ the UK HMRC have consistently updated their register and deleted some of the schemes in certain jurisdictions who were abusing the spirit.
We track the various QROPS providers to ensure we know the ‘best’ providers, but also those that are legal and will be around for the long haul.
At this stage I think it’s worth noting why an individual might look at potential pros and cons to keeping your pension funds in the UK:
- Having your pension in a currency where most of your day to day expenses are. So if you live in Malta better to have a pension in Euros to reduce risk of an adverse change in the Sterling - Euro exchange rate.
- It may enable you to access some of your funds earlier to meet immediate cash requirements, such as pay off a mortgage or fund a home in the sun!
- You might have more choice of funds in which you can invest, you may be able to change your risk level, but you should expect higher rewards if risks are higher. The key is to find the right balance for your personal circumstance.
- When you die with some UK pensions only half your pension fund goes to your spouse or nominated beneficiary. With most QROPS all your remaining funds can be passed on to your choice of beneficiary and the choice is much wider that just spouse of dependent.
- In the case of a couple, when they have both died, generally 100 % of the pension fund and income ceases.
- With many UK pensions there may be inheritance tax (IHT) payable on your pension as it could form part of your estate when you die, depending on the country of residence. With better tax planning and QROPS as part of that, the level of IHT can be better optimized.
Lawsons Equity have built strong and solid relationships with QROPS scheme providers in Malta, Isle of Man, Gibraltar and Guernsey, each one with a good understanding of clients’ needs and aspirations when it comes to pension provisions.
It’s also important to note that it’s extremely important to use those who are robust in terms of pension rules and legislation. One other point on jurisdictions and that choice is based on current legislation, but as best as we can we need to look ahead.
First to look ahead at life expectancy to look how much can be withdraw and still have enough to last as long as you live. Also it is key to have an idea of you future requirements and therefore income drawdown since this will impact you tax rate.
So draw a pension at a rate that means it will last for your life expectancy and drawing tax efficiently will help make it last.
Ultimately each transfer has to be taken on its own merit with regards to the type of scheme to be transferred, how many years until the client is looking to draw down, the personal tax situation of the client now and at retirement, the level of charges applied to establish and maintain the future QROPS structure and current value and type of assets held by the client, and even where the money is likely to be spent.
All these factors can and will dictate the potential jurisdiction recommended for the client.
How Can You Benefit From The 2006 Pension Reform Legislation?
If you have a private/pension, SIPP, government pension, works pension or other UK based pension other than a “state old age pension” you may be able to benefit from this new legislation.
To do so you may be able transfer your pension benefit from some of the above mentioned advantages and avoid the limitations of some of the UK based schemes.
The transfer must be made to a Qualifying Recognised Overseas Pension Scheme (QROPS for short) that is approved by HM Revenue & Customs (HMRC) of which Lawsons Equity has access to.
Such a transfer (if possible) could mean significant benefits for you:
- Extract a lump sum even before retirement age (up to 30% of your pension), taken from the fund, tax free.
- More efficient tax planning regarding Inheritance Tax duties
- Take control of the investment of your pension fund, choose your investment strategy
- Receive the pension income in Euros or Sterling, or a combination and so avoid currency fluctuation from GBP to Euros. The balance can be changed annually as the proportion of expenses in each currency changes as your family and life circumstances change (i.e. children leave home, children go to university in the UK, UK home sold so no more mortgage payments etc)
- Potentially receive a greater monthly/ quarterly income
- The clients nominated beneficiaries receive the full pension fund on death rather than a reduced spouses pension
QROPS Advice: Is QROPS Right For You?
The answer to this question cannot be applied until a full fact finding exercise is undertaken. The scenario often used is you cannot expect to go to a doctor and simply request medication.
In reality and to receive the most suitable medication and course of tablets your doctor will as you know go through a series of questions.
Possible pension transfers have to follow the same course in that an in depth view of clients current financial circumstances a jurisdiction outside of the UK just your pension but other savings, debts, normal expenditures, and his expectation for the future in terms of phased income required (pay off a house, pay university fees, pay for a wedding etc) will need to be obtained.
With this information a set of appropriate and suitable recommendations can then be made.
Who Is Eligible For QROPS?
Any individual of any nationality who has created a UK based pension fund (excluding the UK old age pension).
A pension fund may be in existence due to payments or contributions made from a non-contributory scheme, i.e. the employer funded the employees’ pension pot.
Lawsons Equity has a number UK expat (in various EU countries and even Maltese, Spanish, Italian and Portuguese clients who have worked in the UK at some point in their lives and either personally paid into a pension fund via their salary through their employer or paid into a personal pension scheme from their bank account.
In summary, if a UK pension fund exists we can give guidance to the individual regardless of his or her nationality.
Overseas QROPS Transfer Charges
The Overseas Transfer Charge, OTC, was introduced in the recent UK budget 9th March 2017 and is equal to 25% of the transfer value.
The charge will apply if you are not tax resident in the EEA (European Economic Area) and the transfer is made from the UK to a country other than where you reside, i.e, you are a tax resident in Canada and the transfer is into Malta.
Alternatively if you are a tax resident in the EEA and the transfer of your pension is to a country outside of the EEA the charge will still apply.
Benefits Of QROPS
- More efficient tax planning regarding Inheritance Tax duties
- Take control of the investment of your pension fund, choose your investment strategy. Conversely and generally speaking in the UK your pension will be invested regardless of your age and risk profile. Utilising a QROPS you will have far greater control and input on how your pension is invested.
- Receive the pension income in Euros or Sterling, or a combination and so avoid currency fluctuation from GBP to Euros. The balance can be changed annually as the proportion of expenses in each currency changes as your family and life circumstances change (i.e. children leave home, children go to university in the UK, UK home sold so no more mortgage payments etc
- The clients nominated beneficiaries receive the full pension fund on death rather than a reduced spouses pension.
- There is a wider choice of beneficiaries than in some of the UK schemes.
Do You Need To Leave UK Forever To Benefit From QROPS?
There are a number of alternative structures (to QROPS) with the above benefits that can be utilised regardless of whether or not an individual remains in the UK. Please contact us for free consultation to discuss in full.
Where To Find Current QROPS Provider List ?
The registered list of QROPS providers can be found at the following link.
The receiving scheme will often ask for evidence that the scheme accepting the transfer is stated on the UK HMRC list.
Why It Makes Sense To Take Specialist QROPS Advice?
Lawsons Equity can offer a confidential, no cost initial consultation whereby and as stated above a complete picture gathering exercise is conducted.
This means that we can then use one of the many QROPS providers we have relationships with, in the most robust jurisdictions to suit you and your proposed transfer or find an alternative solution if more appropriate to a particular set of circumstances.
We are able to combine this with a wealth of experience and expertise offered by fully qualified consultants.
It must be emphasised that there is no obligation whatsoever and in fact after an initial meeting it may be recommended that no changes should be made to your existing pension plans and provisions.
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KIND WORDS FROM OUR CLIENTS
"Just a short note to say thank you for your kind attention and advice.
Your professional, yet friendly approach with simple explanations of the products available together with the benefits and risks and detailing the various processes, potential charges, fees etc. greatly assisted our decision regarding the suitability of the product for our circumstances.
The follow up you then provided in assisting with establishing other necessary contacts e.g.lawyers and your continuing availability for consultation, enabled us to achieve a satisfactory conclusion. "
"Lawsons Equity were able to firstly find out the exact value of my UK pension which I must admit I had almost forgotten about and then helped me to take a lump sum from it earlier than I expected which I was very grateful for and helped me to restart with my business here in Malta"
"I have been worried about my UK pension for some time because the value of it seemed to be going down and down and it was extremely difficult when attempting to contact the correct department and transferred from one to another. Lawsons were able to make contact and apply for a transfer which means I can have an input over where it will now be invested and avoid many telephone calls to the UK"
"I was impressed with the continual communication with Lawsons from the outset. My questions were always answered in a prompt manner and I found them to be extremely efficient throughout my transfer"
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