Your Complete Guide to QROPS – and How it can Benefit You

You may have already heard of QROPS, which stands for Qualifying Recognised Overseas Pension Scheme, and it has become a popular scheme since it was first introduced in 2006. QROPS is recognised by HMRC, which contributes to its popularity, and it comes with a lot of benefits for individuals who are thinking of moving overseas or those who are already expatriates. But even if you have already heard of QROPS and you have an idea of what its benefits are and what it can do for you, all the jargon surrounding it can be quite complicated. But if you are an expat and you qualify for it, it may be worth your while learning more about QROPS and its advantages. Here’s your complete guide to QROPS – and how it can benefit you.

Benefits on taxes

In a QROPS, you should know that your contributions and pension fund will not be subject to income tax or capital gains tax. Additionally, different kinds of QROPS allow you to take out or withdraw as much as 30% of your pension without any taxation, as a lump sum, which is 5% more than what you could withdraw with an ordinary pension in the United Kingdom.

Local rates

If the jurisdiction where you live allows it, you can get your gross QROPS income paid out as you are only responsible for your local taxes. It is fair to say that in different countries, QROPS income can be structured and arranged so that you will not have to pay any taxes each year, or at least, pay less, as opposed to your standard state UK pension taxes. Offshore funds also qualify under this, and you may then access this wherever you reside. You should also know that pension income classified with a QROPS is classified as a foreign pension, so if you return to the UK, only around 90% of the QROPS income is taxable.

Benefits on retirement

If you take advantage of a QROPS, you may be able to retire much earlier than would be possible if you were merely in the United Kingdom, and you will also be able to access your pension fund. To make this clearer: even if you were only 55 years of age, you could already receive your fund depending on your individual situation or circumstances (such as having ill health or a health condition). There are even some QROPS which allow you to access your funds from 50 years of age.

Benefits on inheritance

Here’s another benefit of QROPS – if you decide to transfer the pension funds you have to a QROPS, you have the option to nominate a beneficiary, which makes transferring your wealth a much easier and quicker process. There aren’t as many restrictions compared to UK regulations where the age difference between a husband and wife or vice versa can lead to a reduction in the pension of the spouse.

Also, if you pass away and you are classified as a non-United Kingdom resident, and you have been one for over five consecutive years, your surviving family can receive the remaining balance of your QROPS without any death taxes. In the UK, a death benefit tax of 55% is deducted when it comes to pension funds, but a QROPS does not fall under this ruling. Nor does a QROPS fall under inheritance taxes, which can go up to as much as 82%.

Of course, choosing a QROPS is a delicate matter, especially if you do not know much about it. You have to ensure that you choose wisely and with the best advice, the same as selecting the best recommendations in regards to your other options for pensions for expats. But at the end of the day, if you have the proper guidance, you can receive the full benefits of any scheme, QROPS or otherwise.