EXPAT RETIREMENT PLANNINGQROPS
What is a QROPS?
(Qualifying Recognised Overseas Pension Scheme)
A QROPS is a pension scheme based outside of the UK that is broadly similar in character and law to a UK pension, which then receives HMRC approval to be classed as a ‘Qualified’ and ‘Recognised’ overseas pension scheme.
Most QROPS schemes are typically based out of Malta, due to the country having dual-taxation agreements with the vast majority of others. This means that proceeds from a QROPS are typically paid out gross (i.e. no UK or Maltese taxation). It is then up to the policy holder to declare the income in their country of residence.
The QROPS landscape has changed drastically over the last decade, with various iterations on the pension law. The most prominent of these is the introduction of the Overseas Transfer Charge, which is a 25% charge on your pension if certain conditions are not met.
In the 2023 UK budget, the lifetime allowance charge on UK pensions was also abolished, which was the driving reason for most people transferring their pensions to a QROPS.
Who is it for?
In the past, QROPS accounts were incredibly attractive for pension holders with pot values over £1 million. That is because the main benefit of a QROPS was the absence of the lifetime allowance charge - a tax raid on wealthy pensioners. This is no longer the case, meaning QROPS have lost their key selling point. So who would use a QROPS now?
One reason someone may wish to use a QROPS is to detach themselves fiscally from the UK system, if they had fears over the UK financial systems. A QROPS does also offer more niche investment holdings, so this could appeal to professional investors who wish to take control of their pensions.
KEY FEATURESPaid out gross of UK taxation
Greater investment choice
No UK ties or regulation (not necessarily a positive!)
LIMITATIONSFar more expensive than SIPPs or UK pots
Lack of regulation compared to the UK
Drawdowns take longer to facilitate
Our Verdict
The QROPS used to be a viable option for wealthy expats, however with the removal of the lifetime allowance charge we are struggling to see the upside. For clients fearful of the stability of the UK and its financial systems, it may offer peace of mind.
For us, there are now better, cheaper and safer options out there.
