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Contract QROPS USA

Trireme - Independent Review

Best For: QROPS for USA residents or French residents where a contract based QROPS is required.

Cost: 8/10 - They are well priced for the flexibility and options available.
Service: 8/10 – Reasonable processing times but can be slower where cases are more complex.
Overall: 8/10 – Very good and especially good for unusual cases.

Company Overview:
Qualifying Recognised Overseas Pension Schemes (QROPS) is a legitimate retirement planning tool for the majority of British expatriates. However, care needs to be taken when you are a US resident using a QROPS as there may be significant disadvantages.

There is no structure in place to transfer a pension to the United States therefore those with UK based pension are being advised to use QROPS as a solution to their pension planning. There are a
range of jurisdictions that provide QROPS and indeed both trust and SICAV contract based structures.

Maltese based pensions are excluded from FATCA reporting within the terms of the intergovernmental agreement between Malta and the USA. The DTA between Malta and the US clearly defines the tax treatment of the benefits from a Maltese pension too. Same
protections – more in fact as the treaty with Malta is very specific about the protected capital element of the PCLS – the UK one is not. The US/Malta treaty applies far more widely too rather than just between the US and the UK. There is potential that if you haven’t
amassed enough foreign tax credits, that the transfer to the QROPS may be a taxable event.

In our opinion we are comfortable that a transfer to a QROPS is not taxable as long as at the time the pension holder is resident in the UK or the US. However, the next stage of FACTA is due to be released in 2017 and in our opinion this could result in a trustee based foreign pension scheme (e.g. QROPS) becoming classed as a foreign
pension held in a trust and therefore becoming a foreign grantor trust. 

One way to avoid this issue in future would be to consider the use of a contract based solution specifically designed for use by US residents, thus avoiding the potential future trustee issue while still retaining the same benefits as a trust based solution. These are also more secure as the funds are fully segregated and would never be held anything other than completely separately unlike in a trust custodian arrangement.

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