QROPS (Qualifying Recognised Overseas Pension Schemes) apply HMRC rules in non-UK jurisdictions to offer multiple benefits over their UK pension counterparts. Following the latest pension amendments these advantages are as follows;

Click to download for free the latest QROPS guide on pdf
 
QROPS benefits overview which includes areas on consolidation, control, security, tax, and risk. QROPS advantages explained in detail in the article with a link through to QROPS guide downloadable pdf
QROPS allow up to 30% of an accumulated pension savings pot to be withdrawn tax free in comparison to only 25% tax free for UK Registered Pension Schemes’ (RPS) *
UK pensions are liable for tax in your country of residence whenever you withdraw any funds. The best performing QROPS pay pensions free of tax to prevent any excess tax being paid. By contrast, UK pensions usually pay income (net) after basic rate tax (20%) has been paid, which may be non-recoverable. Alternatively, ensuring that the plan’s jurisdiction holds a Double Taxation Agreement (DTA) with your retirement destination can allow you to offset any taxes paid against those due. If you have retired to a country with a lower tax rate than the UK then holding a QROPS can reduce your tax bill. You may wish to seek specialist advice on this matter
QROPS are only taxed on 90% of any income withdrawn for UK residents
The LTA is a mechanism to limit how much anyone can benefit from a pension structure. Those with pension savings in excess of the defined limit will become liable for an additional tax charge unless they hold sufficient protection. The current LTA limit is due a further reduction to £1 million from the 6th of April 2016.
 
A QROPS transfer triggers a unique benefit crystallisation event ensuring that it is assessed against the LTA only once thereby avoiding being penalised by any future reductions in the LTA limit (which has been as high as £1.8 million between 2010-2012) and for any future investment growth achieved post transfer

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Your investments can grow in the most tax efficient structure available
Avoid paying UK death tax rates which can be up to 45% on any remaining pension funds
HMRC regulations allow QROPS to legally avoid being liable for inheritance tax
Pass on 100% of any remaining pension pot to whomsoever you wish. There are no rules governing who can receive your wealth on death allowing you complete control over who your beneficiaries are. In comparison, final salary pension schemes only tend to provide half your ongoing income to a remaining spouse or, alternatively, dependants who are under 23 years old
You have the ability to hold your pension assets in the currency denomination of your choosing. By selecting investments and a pension structure matched to your income requirements on retirement you can avoid any currency fluctuations.
 
As an example of how this could affect you, any British pensioner retiring in the US in 2007 when the rate was $2 per £ would have been significantly worse off 2 years later when the rate dropped to $1.50 per £ if their savings remained in pounds rather than dollars. £20,000 per annum would only provide $30,000 p.a. in 2009 versus $40,000 p.a. in 2007
Following the new uk pension rules, which allow UK residents complete unhindered access to their pension pot once they reach the minimum retirement age, it appears the same advantages could be afforded to QROPS. It may therefore be possible for you to access as much or as little of your pension pot whenever you like.
 
AMENDMENT: QROPS can now offer the same flexibility as UK pensions as a result of the latest rule changes
Protection levels are uncapped whereas UK schemes are typically capped at of £32,761.07 per annum (tax year 2015/2016) via the Pension Protection Fund (PPF). Both UK and overseas schemes offer 90% protection though this can be a minimum of 90% cover for certain QROPS plans. Further details on the UK compensation cap figures can be found here
Once outside the changeable UK jurisdiction, which has undergone two radical pension rule changes within the last 10 years (2006 & 2015), there  is the potential to avoid any future negative rule changes.
 
Of note, the term pension commencement lump sum (PCLS) dropped the words “tax free” some years ago in a move that has broadly gone unnoticed. It would therefore be unwise to bet that the 25% tax free lump sum currently available on pensions will always remain that way

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There are pros and cons to making a defined benefit (final salary) pension transfer. The main reasons to do so centre around the capped level of protection provided in the event of a scheme being closed and the potential of receiving a high transfer value in exchange for foregoing the guarantees provided. It is also possible to withdraw income from a QROPS from 55 years of age without being penalised. A final salary pension plan by comparison typically has a Normal Retirement Age (NRA) of 60+. Accessing your pension prior to the NRA may result in you being penalised via a reduction in the pension that you would otherwise be entitled to. As before, the transfer value offered has to be assessed to ensure that the benefits given up are fully compensated for. This is done using a matching yield analysis which will establish the growth rate required to give the equivalent pension and should be performed prior to any transfer taking place
Transfer all your pensions into one place allowing you to easily monitor and track your retirement provisions. This may help if you are following a sound retirement plan
QROPS can provide a platform to invest in a huge array of investments across the full risk spectrum. This allows you to diversify and tailor your portfolio to your exact requirements. Although tax rules don’t prohibit any investments outright in UK registered schemes HMRC can levy excess tax charges to an administering pension scheme, the member or a scheme employer if applicable. This usually leads to UK administering pension schemes restricting investment options
Internet access gives you complete control over your pension including up to date valuations and investment performance monitoring
Ability to potentially transfer your pension to a more favourable jurisdiction in the future without incurring any additional charges
Specific assets can be attributable to individual members to allow the accountability of investment performance. It is therefore not possible for another person’s pension performance to affect your investment returns

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* The exact tax treatment of any pension will be down to your personal circumstances. Although both QROPS and UK based schemes may allow for a tax free lump sum to be withdrawn this does not preclude you from the tax rules applicable on such withdrawals in your country of residence. Please contact us for further information.
 

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Top QROPS benefits following rule changes written by Don MacRitchie average rating 4.7/5 - 34 user ratings