QROPS & SIPP
UK Pension Transfers
A Simple Guide
Pensions are complicated and many expats are confused about the benefits of switching their UK pensions into a QROPS (Qualifying Recognised Overseas Pension Scheme) or a SIPP (Self Invested Personal Pension). Both can provide a secure environment for your pension money and many people are unaware of the significant tax and financial advantages they can offer.
QROPS is a pension based in an offshore financial jurisdiction, usually places such as Malta, Gibraltar and the Isle of Man. A QROPS is very similar to a SIPP which is based in the UK.
Who can take advantage of a QROPS or SIPP? If you have lived and worked in the UK and you have a UK pension but you are now an expat or non UK resident you can transfer these pensions into a QROPS or SIPP. UK residents can also access QROPS and SIPP’s. UK residents should consider a QROPS ahead of a SIPP mainly if they are intending to leave the UK or have large pension funds close to the lifetime allowance (£600k+).
Almost all UK pensions can be transferred into a QROPS or SIPP, however, there are some exceptions. The pensions that cannot be transferred include the UK state pension and other government sponsored schemes such as NHS pensions, teachers pensions, Police pensions and army pensions.
What are the benefits of a transfer? Transferring your UK pension to a QROPS/SIPP can make a lot of financial sense for an expat as some of the benefits include:
- More tax free cash, depending on your circumstances you may get a 30% tax free lump sum instead of 25% in the UK.
- A better investment choice - giving you almost unlimited access to stocks, ETFs, funds, fixed income and more from a global selection.
- By choosing the right pension jurisdiction the benefits can often be paid free of tax although tax may be due in the country of residence.
- QROPS can hold and pay benefits in multiple currencies.
- A QROPS or SIPP allows the full pension benefits to continue being paid to a spouse or dependents after your death.
- With qrops there is no tax charge on the fund at death avoiding a potential 45% tax charge in the UK
A QROPS or SIPP can be a good way to consolidate several small pension into a single scheme and if you already have a QROPS or SIPP it’s worth reviewing as you may be able to upgrade to a more modern or cheaper version of the QROPS or SIPP.
Both QROPS and SIPP’s are tax efficient pension schemes approved by HMRC. If where you live has no QROPS its no problem as many providers offer third country QROPS. For example a british expat in Spain can transfer their pension to somewhere like Malta and assuming they are a tax resident of Spain can use local income tax rates when drawing their pensions.
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QROPS & SIPP - UK Pension Transfers Overview
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