Choosing a pension fund can be a minefield for the uninitiated investor, especially if you are thinking of retiring overseas. The UK Government introduced Qualifying Registered Overseas Pension Schemes (QROPS) in 2006 with a view to simplifying the options available.
QROPS offer members of UK based pension funds, who wish to emigrate for their retirement, the opportunity to take advantage of lower tax rates and various other benefits available abroad. Non-UK citizens who have built up a pension fund while working in the UK can also qualify for QROPS, should they wish to return to their homeland after retirement.
It should be noted that QROPS only apply to occupational or private schemes, not the state pension. The rules for qualifying for QROPS are set by Her Majesty’s Revenue and Customs (HMRC). The original legislation has recently been amended to prevent fraudulent use of the tax benefits available to QROPS holders. QROPS are essentially pension funds that are based in a country that the HMRC recognises as having a Double Taxation Agreement. The UK pension scheme holder may transfer their pension fund to the QROPS without being subject to any tax penalties.
Some of the possible benefits of QROPS, depending on the scheme provider, include:
• No income tax on pension income because benefits are paid gross
• No income tax on pension cash lump sums
• No capital gains tax on pension fund gains
• No inheritance tax or other death duties.
When introduced, qualifying schemes only had to report to HMRC withdrawals made from pensions during the first five years; HMRC has recently doubled the reporting period, effectively ensuring that QROPS will be required to report payments made for the lifetime of the scheme.
One of the advantages of QROPS is that the pensioner can live in a different country from where the scheme is based. This has thrown up anomalies where the pensioner can be subject to less tax on their pension scheme than the standard rate of income tax in the pension’s host country. HMRC have picked up on this and now will only approve schemes where the tax paid is equal to the standard tax rate. This amendment has effectively ruled out some locations, such as Guernsey, hosting QROPS.
One country that still offers exceptional value in hosting recognised pension schemes is Malta. The popular holiday resort and staunch ally of the UK in World War II offers a haven for those who wish to enjoy their retirement in the sun, free of financial worries.
Because Malta is a full member of the European Union it offers investors security and protection against frequent changes in UK legislation. Malta has provided a safe haven for becalmed and stricken shipping since Biblical times. Now, Maltese hosted, lowest cost QROPS give you a safe, secure harbour for your hard-earned pension benefits.
So, how do you choose which QROPS provider to steward your pension funds? HMRC provide a list of recognised schemes. The problem with that is that the pension provider can choose not to be listed. There are literally thousands of different schemes on the market. You need to be assured that the fund you choose will give you peace of mind and the best possible return.
Not many of us have the time and expertise to plough through the many schemes available. You would be best advised to find someone who has experience and knowledge in identifying which QROPS would best meet your needs.
For the very best in independent advice you should approach an organisation such as Qrops.net to ensure that your pension is in safe hands.