QROPS
Building up enough retirement savings and setting yourself up financially requires careful planning.
But if you plan on retiring overseas, there are additional things to consider, such as what to do with your UK pension pot.
Should you leave your pensions in the UK or transfer them to an alternative arrangement?
For those planning on retiring overseas, a QROPS can provide several benefits for those with UK pension schemes, including greater flexibility and control over their retirement savings.
This guide looks at what QROPS are, their benefits, charges and other key info to help you understand your options if you plan to retire abroad.
What is a QROPS?
QROPS stands for qualifying recognised overseas pension scheme.
A QROPS is an overseas pension scheme that satisfies the rules set out by HMRC, allowing it to receive transfers from UK-registered pension schemes.
To be qualified by HMRC, overseas schemes generally need rules similar to UK-registered schemes, such as no access to benefits before age 55.
QROPS are commonly used by people who built up UK pension funds but plan to retire overseas, allowing them to take pension savings with them rather than leaving them in the UK.
What are the benefits of a QROPS?
A QROPS can offer potential benefits for expats planning to retire overseas. Outcomes depend on where you live and where the QROPS is based.
Income tax
Pensions in the UK are taxable if your total income exceeds your Personal Allowance. With a QROPS, pension income may be taxed more favourably or not at all depending on your country of residence.
For example, in zero-income-tax countries with a double taxation agreement with the UK, you may be able to draw your pension without tax penalties. See our pension tax guide for more.
Inheritance tax
Like UK pension funds, QROPS are generally outside of your UK estate for inheritance tax purposes, though local IHT rules may apply. Specialist advice is recommended.
Pension commencement lump sum
Many jurisdictions allow a lump sum of up to 25% or 30% of the fund value, with the balance typically used for drawdown income.
Currency
UK pensions pay in sterling, exposing you to FX costs. A QROPS can pay in a local currency to reduce exchange-rate risk.
Pension consolidation
If you have multiple pensions, a QROPS can combine them into one pot for simpler management. Learn more about pension consolidation.
Investment options
Compared with many UK schemes, QROPS often offer wider investment choice, subject to jurisdiction. Commonly allowed: shares, bonds, funds, cash deposits, commercial property. Prohibited assets typically include residential property and tangible assets such as art and wine; those may be considered under a QNUPS.
UK pension transfer and tax rules explained
When transferring a UK scheme to a QROPS, a 10-year reporting period applies.
During that time, the QROPS provider must report certain payments to HMRC. Unauthorised withdrawals, such as accessing funds before age 55, may trigger tax charges.
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QROPS pension transfer charges
An overseas transfer charge of 25% can apply to the amount transferred, but exemptions exist.
Transfers may be tax-free if you live in the same country as the QROPS, you live in the EEA and the QROPS is in the EEA or Gibraltar, or the QROPS is provided by your employer.
Can any UK-based pension be transferred?
Most scheme types can transfer to a QROPS, including private defined contribution pensions, workplace schemes, and many defined benefit pensions.
By law, if a DB transfer value exceeds £30,000, you must obtain advice from an FCA-authorised adviser with permission to advise on pension transfers and opt-outs.
QROPS and the pension lifetime allowance
The lifetime allowance is the maximum pension benefit you can build up before tax applies. It was £1,073,100 for 2023/24, with reforms removing the LTA charge from April 2023 and abolishing the LTA from 2024/25.
QROPS vs SIPPs
Another option for expats is a self-invested personal pension.
Both are pension wrappers with different trade-offs. SIPPs give direct investment control but may not offer the same tax treatment overseas. QROPS can carry a 25% transfer charge unless you meet specific criteria, while SIPP transfers generally do not have such a charge.
Pension planning with Holborn Assets
Before committing to a transfer, speak with a qualified adviser who can assess suitability for your circumstances.
If you already have a QROPS, a pension review can confirm it still aligns with your goals or identify better options.
Whether you plan to retire overseas or just want to understand your choices, we can help.
At Holborn Assets, we provide independent advice tailored to your needs and goals, helping you build towards a more secure financial future.
Get the guidance you need to maximise your pension income and make the most of your retirement. Book a free, no-obligation meeting today with one of our pension experts.
