Qualifying registered overseas pension schemes
Encyclopedia
A Qualifying Recognised Overseas Pension Scheme or QROPS is an overseas pension scheme that meets certain requirements in order that it can be recognised by Her Majesty's Revenue and Customs
Her Majesty's Revenue and Customs
Her Majesty's Revenue and Customs is a non-ministerial department of the UK Government responsible for the collection of taxes and the payment of some forms of state support....

 (HMRC). A QROPS can receive the transfer of UK Pension Benefits without incurring an unauthorised payment and scheme sanction charge.

Typically this occurs when a UK resident leaves the UK to permanently emigrate
Emigration
Emigration is the act of leaving one's country or region to settle in another. It is the same as immigration but from the perspective of the country of origin. Human movement before the establishment of political boundaries or within one state is termed migration. There are many reasons why people...

 (or to retire abroad) having built up a Pension Fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...

within a scheme approved by HMRC or when a person born abroad who has built up benefits in a HMRC approved UK Pension Scheme decides to return to their home country with an expectation of retiring there. The QROPS does not have to be established in the "new" country of residence thus allowing greater flexibility and choice of scheme provider.

HMRC state that:


Under section 150(8) a recognised overseas pension scheme is an overseas pension scheme that meets the following requirements prescribed under The Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) Regulations 2006 (SI 2006/206). It must:
  • be established in a Member State of the European Union, Norway, Liechtenstein or Iceland, or
  • be established in a country or territory with which the UK has a Double Taxation Agreement that contains exchange of information and non-discrimination provisions - see the list in RPSM14101046 (there is more information on the provisions of particular Double Taxation Agreements in the Double Taxation Relief Manual), or
  • satisfy the requirement that, at the time of the recognised transfer, the rules of the scheme provide that:
    • at least 70% of the funds transferred will be designated by the r scheme manager for the purpose of providing the member with an income for life,
    • the pension benefits (and any associated lump sum) payable to the member under the scheme, to the extent that they relate to the transfer, are payable no earlier than they would be if pension rule 1 in section 165 applied, and
    • membership of the scheme is open to persons resident in the country or territory in which it is established.


Pension rule 1 in section 165 provides that no payment of pension may be made before the day on which the member reaches normal minimum pension age, unless the ill-health condition was met immediately before the member became entitled to a pension under the scheme.



To become a QROPS the scheme must applying to HMRC. A list of QROPS that have consented to have their names published is available on the HMRC website and is regularly updated.

QROPS are increasingly popular under British Expats due to the tax advantages on the pension draw downs and death benefits. Pension funds left in the UK are heavily taxed, in some cases up to 82%. Transferring a UK pension fund into a QROPS can avoid UK taxation.

External links

  • http://www.hmrc.gov.uk/PENSIONSCHEMES/qrops.pdf
  • http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm14101030.htm
  • http://www.whichoffshore.com/offshore-retirement-planning/qrops-and-pension-transfers
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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