British citizens living, working and retiring abroad face a number of financial consequences, and a particularly prominent consequence at the moment is how to deal with pensions. The proceeds of a pension – the income it provides to the fund holder – are usually liable for tax in the UK; however, selecting a suitable overseas pension can lead to considerable tax savings – as well as a number of other benefits. A QROPS pension is ideal for people living abroad permanently or for those who move around the world with their jobs, as the actual fund stays in one jurisdiction.
What is a QROPS Transfer?
A Qualifying Recognised Overseas Pension Scheme has been designed for British people who live – or intend to live – abroad. Only schemes approved by HMRC can be adopted by British fund holders, and a minimum pension value of £25,000 is usually required to make such an arrangement worthwhile. Selecting an appropriate QROPS scheme is best done with a specialist financial advisor, but the right scheme will allow the holder to move around the world whilst enjoying a number of benefits. Transferring a pension is a big step, but utilising the right advice will make it a prudent decision.
What are the Advantages of a QROPS Pension?
The whole idea of this sort of pension scheme is that the funds are based in offshore jurisdictions, and they are not taxed at source. Some countries which British expats settle in will impose income tax on the proceeds of a pension, but there is a very good opportunity to avoid both inheritance and capital gains tax in those countries. This flexible pension arrangement also allows the holder to construct a bespoke financial management plan that suits the income, future plans and assets of the individual. There is also no need to purchase an annuity; the flexibility of such schemes allows people to retain ownership of their asset.
The HMRC imposes strict limits on the percentage of a pension fund someone can take as a lump-sum – in some cases 20% more can be taken in offshore jurisdictions. Many people decide on a QROPS transfer because it makes leaving assets to loved ones far easier. Inheritance regulations are relatively severe in the UK, and that can leave beneficiaries with less money and more red tape after the death of the fund holder. However, many QROPS funds will be completely free of interference from HMRC. An investment bond is recommended for people with over £100,000 in their pension pots, and placing these in QROPS schemes will deliver long-lasting benefits that aren’t at the mercy of UK taxation rules.
Anyone who is considering a life abroad should seriously consider a QROPS scheme, as it will help to protect pension funds from unnecessary taxation and regulation. It doesn’t matter whether the fund holder is 18 or 68, thinking of the future now will deliver tangible benefits during retirement.
Which Offshore is an online consumer resource for those seeking information and advice pertaining to matters related to expatriate life and offshore finance. For more information, please visit – http://www.whichoffshore.com/qrops