FAQ - Transfer your deferred UK Pension Plan or Scheme
FAQ
Q. What is a QROPS?
A. A QROPS is a Qualifying Recognised Overseas Pension Scheme.
Q. Who can move their pension into a QROPS?
| A. | Anyone who has left the UK permanently and is living overseas. It does not matter if they are resident in the USA, Canada, Australia, New Zealand or any other country (except the UK). It also applies to nationals of other countries who worked in the UK and built up a pension fund while they were there. It is not necessary for the policy holder and the QROPS to be resident/established in the same country. |
Q. Which types of pension can be transferred into a QROPS?
| A. | (i) Most types of personal pensions including SIPPs and Stakeholder Pensions. (ii) Most types of occupational pensions including those containing 'protected rights' money and GMP (Guaranteed Minimum Pension). This includes civil service (local & central government) pensions. |
Q. What is the minimum transfer I can make into a QROPS?
| A. | There is no minimum level. However, it may not be efficient to transfer a single smaller pension into a QROPS.
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Q. Am I able to transfer protected rights funds into a QROPS?
| A. | YES - If the receiving QROPS is willing to accept it. When transferring protected rights it is necessary to state that you understand that all protection associated with UK pensions legislation is being given up.
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Q. How long does the QROPS process take?
| A. | From start to finish normally takes 4-6 weeks.The first step is to complete a Letter of Authority. This enables the most up to date information about your scheme to be obtained including benefits and transfer value.This will also allow us to collect the appropriate discharge forms from your pension provider. Once we have this information we will provide you with a detailed analysis of your current benefits and the advantages and disadvantages of transferring to a QROPS. Please note that the transfer can not proceed until you sign the discharge forms. |
Q. My pension fund is of substantial value. Are there any tax issues?
| A. | A transfer to a QROPS will be a Benefit Crystallisation Event and so will give rise to a tax charge if the amount transferred exceeds the individual’s unused lifetime allowance. The Lifetime Allowance is £1.75m in the 2009/10 tax year. The following table shows the Lifetime Allowance for past and future tax years.
Thus before any transfer to a QROPS is finalised it is essential to check whether there is any possibility of this allowance being exceeded. |
Q. What are the benefits of a QROPS?
| A. | A transfer to a QROPS removes the requirement to purchase an annuity. Annuities are extremely unpopular in the UK with both pensioners and the press because they are extremely poor value and (except in very few circumstances) never return what the pension has had to invest. Additionally, in the UK the income from an annuity is usually taxed at source even if the individual is not resident there. If the QROPS is established in a tax-efficient jurisdiction, any distributions from the QROPS will be free of income tax in the country where the income is being drawn from. For many expatriates, this means a tax-free retirement income - and a net income of nearly double the amount that they would have received if they left the pension in the UK! On the policyholder’ death, the residual value of the pension passes to their loved ones rather than the annuity provider. In the UK, after the purchase of an annuity the family receives nothing on the death of the policyholder – even if this is the day after the annuity is purchased and nothing has been drawn out.
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Q. How are QROPS structured?
| A. | QROPS are structured in a similar manner to a UK pension; i.e. there is an investment vehicle which is owned on your behalf by a pension administrator (trustee). This trustee must be based outside the UK and approved by HMRC as a QROPS administrator. Through the investment vehicle you can access a wide range of cash, bond, property, hedge, equity and commodity funds - and switch between these funds as market conditions change.
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