QROPS Pension Transfer 2024 | An Independent Review
LEARNING OBJECTIVES
We’re passionate about providing free, high quality and up-to-date information to Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
What a QROPS is and how they work in practice
The main benefits of these pension schemes
Which alternatives may be better for Expats
How to assess an Expat Adviser when taking financial advice
QROPS stands for Qualifying Recognised Overseas Pension Scheme. These schemes are one of 2 options that Expats can use to transfer their UK pensions abroad. The other is the International SIPP (self-invested personal pension).
This article will review the merits and drawbacks of a QROPS in 2024, and delve into the alternatives.
What is a QROPS?
A QROPS is essentially a pension based outside of the UK that is similar in function to UK pensions. The UK government and HMRC will only allow Expats to transfer into international pension schemes that broadly follow the rules of UK pensions. These rules include:
PCLS payment (tax-free payment of 25%)
Only accessible from the age of 55
Flexible access draw-down
Wide range of investment options
Reporting requirements to HMRC
For obvious reasons, HMRC does not allow British Expats to transfer into offshore schemes that offer significantly enhanced benefits that UK residents would not be able to access.
These QROPS schemes are normally based out of Malta or Gibraltar. This is because these locations have dual-taxation agreements with almost every other European country, meaning they can offer certain tax-benefits to members.
These locations are also known as tax-efficient jurisdictions.
Expat Pension Transfer | Should I Transfer to a QROPS?
The main benefit of these pension accounts were the absence of the lifetime allowance charge, which following the recent UK budget no longer exists.
This means that for many, a QROPS no longer makes financial sense. When compared to alternative solutions, there are draw-backs of using these Maltese based pension accounts, notably:
Cost
These can cost up to 5x more per year to run than typical UK pensions or SIPP accounts.
Security
Without the FCA regulation and the coverage of the Financial Services Compensation Scheme, Maltese QROPS accounts are less secure than UK pensions.
Adviser Charges
Given the lack of regulation, many Expat Financial Advice firms charge huge commissions for transferring to these accounts, which can often result in accounts that only fall in value.
What are the Benefits of a QROPS?
For people sceptical of the UK financial system, transferring to a QROPS will take your pension pot outside of the UK and the jurisdiction of HMRC. This is not necessarily a good thing, however it may give you peace of mind.
Furthermore, these accounts can often offer greater investment choice and allow you to invest in alternative and more niche asset classes, such as overseas property.
Finally, a QROPS may provide certain tax benefits depending on your jurisdiction. For example, unlike a UK pension or International SIPP, a QROPS account will always pay your income out gross (i.e without any taxation from the UK). It is then up to the individual to self-declare this money as income.
International SIPP vs QROPS
The International SIPP is a more appropriate solution for the vast majority of British Expats around the world. Unlike a QROPS account, these are very low cost, often at the same price as a standard UK pension.
They also retain all the regulation and security provided by the robust UK financial system, as well as offering multi-currency investments and full-flexibility in draw-down for UK Expats. For a full breakdown of the Novia Global International SIPP, see our review here.
International Wealth Management For Expats
Aligning your finances with your future goals as an Expat can be complicated, especially considering the vast amount of contrasting information available online. Before engaging with any firm, we encourage all individuals to ask the following questions before establishing any working relationship with an international financial adviser:
Are you regulated, and who by?
How much do you charge?
Is a provider paying you to recommend a product?
Can I leave if I'm unhappy?
Are there any exit penalties, or early withdrawal charges?
Always be sure to conduct thorough due-diligence, and do not work with any adviser that recommends a product with lock-in periods or exit penalties - these are a red-flag and mean large commission payments are being paid to the adviser to sell the product to you.
Working With The Wealth Genesis
The Wealth Genesis is the first internationally regulated advice firm to charge the same flat-fee to all clients, regardless of wealth, circumstances or complexity.
This approach ensures our only priority is providing independent and truly bespoke advice to our clients, which is reflected in our reviews.
Contact us today using the button below to see how we can help you.
FAQs
-
Yes, since the removal of the lifetime allowance in 2023, QROPS accounts have lost their main appeal to Expats.
This was the primary financial planning reason to transfer to a QROPS. -
Primarily because QROPS accounts are based outside of the UK, and outside of the regulatory jurisdiction of the FCA.
This means charging structures are less transparent, and fewer systems are in place to secure positive client outcomes. -
Yes, with the help of a regulated adviser you can transfer your account.
However, it is important to note that your QROPS may have exit penalties and early withdrawal charges depending on how it has been set up.
