A QROPS can accept a UK pension transfer just like any UK-based scheme, although it must meet certain HM Revenue and Customs (HMRC) criteria. The benefits of transferring your fund into a QROPS include portability, increased tax efficiency, and investment flexibility. As the benefits of a QROPS can lead to an improved lifestyle in retirement, their popularity continues to grow among expatriates and individuals considering a move overseas.
Many clients will be eligible for a QROPS. There isn’t any hard and fast rule regarding the minimum or maximum transfer limits to a QROPS, however the suitability of a transfer is determined by a number of factors. As a general rule, transfers under £40,000 may not be cost effective.
It is measured in tax years and not calendar years. So, if a member departs the UK halfway through a tax year, the clock only starts ticking from the start of the following tax year – which commences on the 6th April.
After being non-UK resident for five full tax years, no UK income tax should be due on any income payments and generally there should be no UK tax on death benefits.
Using a range of international investments, funds within a QROPS can grow with no UK tax deducted (depending on the investment chosen). If the member is a non-UK tax resident, no UK income tax is deducted at source on pension income.
In addition to mainstream investments such as unit trusts, portfolio bonds, investment platforms, and discretionary fund managers, a QROPS can also invest in international commercial property and other approved assets.
Many UK pension schemes, including Stakeholder pensions, have a percentage based charging structure. A QROPS from STM has fixed, all inclusive, initial and annual fees, which could offer a significant saving as the costs are not linked to the value of the fund.
Generally benefits paid to a beneficiary are not subject to tax if the member dies before age 75 and are taxable at the recipient’s marginal rate if the member dies after age 75. However, it is possible for benefits from a QROPS to be paid out with no UK tax, passing on more of the fund to a member’s beneficiaries.