QROPS - Is it the answer for Brits moving to France and wanting to have a pension in Euros?

By Steve Grover

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Summary: QDROPS scheme has been specifically designed to enable non-UK resident individuals who have accrued pension benefits in the UK, to transfer these out once they have left the UK.

QDROPS - What is QDROPS?

What exactly is QROPS?

QROPS (Qualifying Recognised Overseas Pension Scheme) was brought about following changes to UK pension legislation on April 5, 2006. The structure of a QROPS is similar to that of a UK pension, i.e. there is an investment vehicle which is owned on your behalf by a pension administrator (trustee). The difference arises where the pension administrator is based outside the UK and only reports back to HMRC (Her Majesty's Revenue & Customs).

This scheme has been specifically designed to enable non-UK resident individuals who have accrued pension benefits in the UK, to transfer these out once they have left the UK. Provided that the UK Registered Pension Scheme and the QROPS provider both have the appropriate transfer authority, individuals who leave the UK and establish a QROPS are able to request a transfer of their UK benefits as long as they can provide evidence they are no longer a UK resident.

Due to the fact that this scheme is an international contract, future benefit payments can potentially be received without deduction of UK tax. Individuals will be responsible for declaring the income in their own country of residence. A QROPS provides asset protection and tax efficient planning opportunities. More importantly, after the policy has been running for five years there will no longer be any obligation to report to the UK HMRC.

What are the Key benefits:

- No requirement to purchase an insurance company annuity, so retain control of the pension assets.

- The ability to pass on remaining pension assets to nominated beneficiaries on death.

- A wider choice of acceptable investments offered over UK plans.

- Greater flexibility around the level and manner of income payments which can be taken from the plan.

- The underlying investments and income payments can be denominated in a choice of currencies to reduce the risk of currency fluctuations.

- Where held offshore, income payments made without the deduction of UK income tax with income tax payable as appropriate in the jurisdiction in which itXs received.

Can any pensions be transferred into a QROPS?

If you have already taken an annuity with your pension then it cannot be transferred, state pension are also non transferable into a QROPS. GMP (guaranteed minimum pensions), Protected Rights schemes, and pensions where the total fund is valued at under BP 200,000 also may not be suitable to transfer into a QROPS.

For further information you can also visit the HM Customs & Revenue website.

This information is only provided as a guide and is based on The Spectrum IFA's understanding of current legislation in June 2008 which may be subject to change. No liability can be accepted for any change of interpretation or practice relating to any tax or legislative measure or the introduction of any new measures that may affect this advice and recommendations. If you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different.

About the Author

Steve Grover is an English Chartered Institute of Insurance qualified expatriate based in France, with over 10 years UK financial services experiance, as well as 8 years exposure to French life and the potential pitfalls of day to day life. Financial Expat is a proud member of The Spectrum IFA Group, a pan European insurance umbrella group allowing its members to advise people in many different countries. Membership of the Spectrum group ensures that we are kept up to date with the varying rules and regulations in Europe.

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First Published: Aug 16, 2008

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