Retiring Overseas? QROPS – Consider Taking Your Pension with You
With blue skies, warm seas and much less rain than the UK, it’s no surprise that more and more people are choosing to take their retirement overseas.
But in the planning stages of this decision, lots of folks can come a cropper when they begin to think about their pension. Whether it’s a personal or work-based pension, the same question can come to mind: If I move overseas, will I lose my pension? Well, there is some good news on that front. With a QROPS (Qualifying Recognised Overseas Pension Scheme), you can enjoy both the warmer climes and the money you’ve saved over your working life in your pension. In this article, we’ll explain how QROPS works and you can decide whether it’s right for you.
What is QROPS?
As always, it’s best to start at the beginning, with a description of exactly what QROPS is. In a nutshell, a Qualifying Recognised Overseas Pension Scheme is a type of pension that’s based outside of the UK, but is still allowed by the UK authorities to receive transfers from a UK-based pension. What this means for a retiree is that they are able to transfer all of the money that they’ve accrued either through a work-based deferred pension, or through a personal pension, and transfer all of it into a pension which will pay within the chosen country. The only restrictions on QROPS are that, in the case of a final salary scheme, pension payments have not begun, or an annuity hasn’t been purchased.
Is QROPS right for you?
If you’re approaching retirement age and you’re considering become a British expat by moving to another country to enjoy your retirement, a QROPS can be a great choice. You’ll need to bear in mind that you’ll be bound by the relevant tax laws within your destination country, and that you cannot transfer a state pension – but assuming you’re aware of all of these, a QROPS could well be the right road. It’s always worth double-checking that the type of pension you have is eligible for the scheme; most of them are, but better safe than sorry!
Things to bear in mind
There is a cost associated with setting up a QROPS. Generally speaking, it will cost anywhere between one and five percent of the transferred amount in order to set up the transfer. You can use this as a yardstick to judge whether or not the tax savings you’ll receive will be worth the barrier to entry. As a general rule, anything over around £90,000 should be enough to offer a comfortable living via the QROPS scheme. Another consideration is whether or not you take the advice of a law professional before carrying out the transfer. The best advice here is: why not? You’ll benefit in ways you might not have considered – and you could end up saving even more money.
So before you jet off for a retirement full of sun, sea and sand, be sure to check whether your pension can come with you!
Written by Simon Morris
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