By JOHN WESTWOOD [email protected]
John Westwood is the Managing Director of Blacktower Financial Management Group
A development in the world of pensions for many expatriates is described as a pension revolution. A scheme which allows you to transfer UK pensions overseas is now available and called QROPS. So if you have a UK pension, read on…
What does QROPS mean?
Qualifying Recognised Overseas Pension Scheme. These new schemes are arrangements fully approved by Her Majesty’s Revenue and Customs. HMRC even publish a list of schemes which qualify on their website.
What is a QROPS?
A QROPS is a recognised overseas pension scheme. The rules must be broadly equivalent to a UK registered scheme and the manager must provide HMRC with information on certain ‘events’. If the QROPS is administered in a country where pension rules are more flexible, there can be great advantages for individuals once they have become non-UK resident. Please note…The individual does not necessarily have to reside in the country where the QROPS is domiciled.
How are QROPS structured?
QROPS are structured similar to UK pension schemes, i.e. there is an investment which is owned on your behalf by a pension administrator. This trustee must be based outside the UK and approved by HMRC as a QROPS administrator.
What are the advantages of QROPS?
These schemes will not be right for everyone, but they do provide tremendous scope for improving the flexibility and tax efficiency of a UK arrangement. Once you have been non-UK resident for five complete tax years, a QROPS has huge advantages.
• No need to buy an annuity – UK schemes may insist that at 75 you buy an annuity or go into a system known as Alternatively Secured Pension, where the fund can be taxed by as much as 82 per cent on death. With QROPS, there is no requirement to buy an annuity at 75 or go into ASP – this allows more flexibility and …
• No Inheritance Tax (IHT) – A QROPS fund can pass free of IHT to your spouse or children.
• Wider range of investments – QROPS offer a wider range of investment options including, in some cases, direct property holdings. Although most restrict residential property to that held through a corporate structure.
• Loan facilities – Blacktower clients have access to discounted loan facilities automatically
• More flexible benefits – QROPS offer a far more flexible approach to the level and style of benefits than that offered through any UK scheme. This can also be in respect of the amount of lump sum cash payable.
• Transfer “Protected Rights” – These are benefits that are accrued in respect of contracting out of the UK state scheme. The Blacktower QROPS is generally able to accept such payments.
• Invest in any major currency. QROPS can generally allow the fund to be held in any major currency. This can avoid exchange rate risks when receiving benefits.
• Income may be paid gross.
This is by no means an exhaustive list of the potential benefits, but for many expatriates, the Blacktower QROPS represents an almost unbelievable opportunity. I know this may seem too good to be true. However, these schemes are 100 per cent legitimate and recognised by HMRC.
As with everything in life, the advantages do come at a cost, which will vary from scheme to scheme, but you can expect to pay slightly higher fees than a similar UK pension scheme. Typically, there will be a small one-off set up fee plus an annual administration fee.
Blacktower clients benefit from reductions to these costs compared to other schemes in the market.
As with all investments, you should take great care and seek professional advice. Only consult advisers that are authorised and regulated by the Financial Services Authority (FSA) and are duly licensed to provide offshore advice and qualified in the field of pension transfers.
For example, Blacktower Financial Management Ltd is authorised and regulated in the UK by the FSA and have been awarded the prestigious title of Chartered Financial Planners by the Chartered Insurance Institute of the UK. Check the credentials and financial strength of the QROPS provider and make sure that the rules applicable to the jurisdiction in which the QROPS is based permit the advantages and features you seek.
Our QROPS advisory service ensures you receive the most appropriate advice for your circumstances.
Please contact John Westwood, Managing Director of the Blacktower Financial Management Group, for further information. Call 289 355 685 or email [email protected]