If you are an expatriate, one of the best things you can do for your retirement or pension fund is to transfer it to a QROPS. With a proper QROPS, you can benefit from estate planning, flexibility, and less tax, as well as benefits related to currency. Essentially speaking, a QROPS is a foreign scheme or pension plan which is recognised by HMRC, so you can receive transfers (which are tax-free) from a UK-registered pension fund. QROPS was first introduced and launched in 2006 in order to help UK citizens who had moved permanently to another country have a much easier and simpler time managing their pensions by taking their funds with them. But is a QROPS the solution for you? Here’s your essential guide to QROPS: what you can really expect.
At the moment, residents of the EU are able to transfer a single or more than one pension to a QROPS with no taxation, whilst transfers outside the EU have an overseas charge of about 25%. When your funds are in a QROPS, they can be sheltered from taxes from the UK on gains and income. They are also no longer considered part of your LTA or lifetime pension allowance, so you can grow them as much as possible without having any penalties of 25% to as much as 55% if you try to access your funds. But whilst the QROPS funds will be taxable when you begin taking benefits from the country where you reside, many UK expats who are living within Europe can get good tax treatment.
Access and flexibility
Whilst most standard UK pensions may be restrictive, the same isn’t true with a QROPS. Many QROPS will allow you to take however much income you want, and at any time. For instance, you could withdraw a higher income early on in your retirement, and then simply reduce the income you receive when you get older. You can also simply get a lump sum and then save the rest of the money for the future lives of your loved ones or a rainy day. Of course, with this amount of freedom comes the risk of exhausting your funds, so you have to be careful and manage and invest your funds as well as you can.
With a QROPS, you also have more options on how you can invest your money. You should be able to select a more flexible plan of investment across a broad range or selection of funds which can suit your objectives, goals, circumstances, timeline, and even your appetite for risk. But investments can go either up or down, so you have to be ready to face the risk – however, if you have a well-diversified and active approach to investing your funds, you can both minimise and manage that risk.
Flexibility in estate planning
It’s true that most pensions in the UK can only pay out to your spouse upon death, but with QROPS, you can choose to have it paid out to other loved ones and heirs. So instead of just passing on with you, you could pass on your wealth to any beneficiary. A QROPS may also provide protection against inheritance tax in the UK when you are passing the assets of the pension to an heir who is a non-UK resident.
Tailor made pensions such as QROPS can provide you with the unique opportunity to grow your pension and retire with ease, whilst providing you with other benefits, besides. And if you are serious about retiring with more confidence, then you should seriously consider this – and other similar pension schemes – as well.
Image attributed to Pixabay.com