QROPS

Posted on Nov. 19, 2009 at 5:28 AM - 0 Comments - Post Comment - Link

A QROPS transfer step by step

A qrops is a Qualified Recognised Overseas Pension Scheme. The system was introduced in April 2006, and means that (under certain conditions) anyone with a UK pension who is planning to live abroad can remove their UK pension fund from Britain without incurring a UK tax liability.

Transferring your UK pension fund into a foreign qrops is not as complicated or daunting as it might sound. Here is a list of tasks that you have to undertake as part of the process.

Step 1 – Review your information

The first step is to dig out all of the paperwork you hold on your pension schemes. Compile details of private and occupational schemes and your National Insurance number to hand when you consult an adviser. Next obtain statements of the balances in each fund, and up to date projections of the levels of income they might yield. Your pensions may not be the only asset you have – compile the information about your other investments to give the person who is advising you the fullest picture.

Don’t worry if you have forgotten the details of an old pension from years ago. The Pension Tracing Service is part of the Department for Work and Pensions, and assists people in this situation to track down schemes that they have fallen out of touch with.

Step 2 – Consider your plans

What are your realistic expectations for retirement? It is important to get the facts and figures straight as soon as possible, so that you can have an idea of what to expect as you get older. Speak to your partner and family about how long you intend to be outside the UK. If you return to the UK before 5 years have elapsed since the transfer into the QROPS, you may incur a UK tax liability, so think carefully about whether your emigration will be permanent.

Consider also your timescale for withdrawing your money. The UK system prescribes that members of UK pension schemes must purchase an annuity by the time they reach the age of 75, and limits the amounts that can be taken as lump sums before then. You may want to access your retirement funds according to a different timetable, so be sure to mention to your adviser any events you foresee which would require this. For example, you may want to help grandchildren onto the property ladder or pay off a mortgage.

Finally, consider how a QROPS will fit into your financial planning from an inheritance tax point of view.

Step 3 – Consult an adviser

Any kind of financial decision must involve a thorough investigation of the market and as assessment of your desires and needs. Accordingly, consulting a pension specialist is a must. QROPS is a specialised area of pension planning, so be sure to choose an adviser who is used to carrying out work in this sphere and regulated by the UK’s Financial Services Authority. A good QROPS adviser will have access to the whole of the market and will not be tied to any particular provider.

You should receive advice not only about the tax treatment that your fund would receive in your intended QROPS host country but also about the tax regime in the country you wish to settle in (if different). The adviser will also advise about the types of funds and investments the each scheme deals with.

QROPS fund trustees and managers make charges in the same way that any other financial providers do, and you will need to assess the amount they charge in conjunction with the service they provide. A QROPS adviser who places a large volume of pension funds in QROPS each year may have the bargaining power to negotiate beneficial rates and fees with overseas QROPS managers, so bear this in mind when you are selecting your QROPS adviser.

Step 4 – Consider the advice

It is important that you understand all of the QROPS advice you have received, so do not hesitate to ask questions if you need any clarification. Your qrops adviser may have given you a number of options to consider, so take a moment to weigh them up and decide which fund to choose.

Step 5 – Get the transfer started!

Some advisers will take care of everything once you have decided which qrops fund to invest in; others will give you the paperwork to fill in yourself. Either way, the transfer will take a few weeks to take effect so leave plenty of time for this process before you actually leave the country.