What is a QROPS?

QROPS are Qualifying Recognised Overseas Pension Schemes which meet the HMRC rules to be regarded as a QROPS.

To be regarded as a QROPS the scheme must be regulated as a pension scheme in the country it is established or if no such regulated body exists the following conditions need to be met:

(a) the scheme is established in a Member State of the European Union, Norway, Iceland or Liechtenstein; or
(b) the scheme rules provide that at least 70% of the funds transferred must be used to provide the individual member with an income for life payable no earlier than the normal minimum pension age (unless in ill health).

Compared to general UK pension rules, a QROPS could offer you these advantages (subject to local pension rules):

• You’re not obliged to buy an annuity.
• It could reduce, or completely avoid, the income tax payable on the income from your pension.
• If you die, your family will be able to inherit your pension benefits free of UK inheritance tax.
• A wider choice of investment opportunities – particularly useful if you want to invest in assets which reflect the currency and inflation factors where you plan to retire, rather than UK-biased choices.
• Only 70% of your transferred fund must be used to provide you with an income for life.
• No restrictions on fund size (in the UK the limit is currently £1.8 million for the 2010/11 tax year).

The attached brochure from Royal Skandia gives a very good overview of the scheme and what it may mean for you. Please contact me if you have any more questions.

Which Jurisdiction For Your QROPS?

The local jurisdiction will set out how the local pension scheme is structured, however many QROPS follow a similar structure:

• There is a master trust set up which appoints a corporate trustee (the QROPS provider) and their powers, roles and responsibilities in terms of administering the QROPS.
• The trustee must be based outside the UK for the scheme to be considered as a QROPS.
• There are usually wide investment powers allowing flexibility for the trustee to invest in a wide range of assets – for example cash, bond, property, hedge, equity and commodity funds.
• The trustee of the QROPS holds these investments on the member’s behalf and has investment powers. They will often appoint an Investment Manager to switch investments on their behalf as market conditions change.
• The trustee would also be responsible for making payments of benefits from the QROPS to the member.

The local jurisdiction will have rules within local legislation and practice which need to be adhered to in order to qualify as a local pension. In addition, if the local provider would like to become a QROPS provider they must meet a number of HMRC rules relating to how and when benefits can be taken, along with defined reporting requirements while the member is UK resident and for five complete tax years after the member has left the UK. The rules of the scheme must be broadly equivalent in terms of payment of benefits to a UK-registered pension scheme to maintain their QROPS status.

I have attached a simple summary of the differences between three of the major QROPS jurisdictions; Isle of Man, Guernsey and Hong Kong. My current “favourites” are Guernsey and Hong Kong since they will not tax you on your pension if you live outside of the countries.
Contact me if you would like to learn more or if you are ready to see what benefits there may be for you personally.

Recommended QROPS Providers

I can personally recommend the following companies for their QROPS products and would be very happy to help you in your UK pension transfer arrangements. Please contact me with an outline of your existing arrangements and I shall help in any way I can.

Hansard International

Royal Skandia

Royal London 360

Premier Group