QROPS – Transferring UK pensions back home for expats
A Qualifying Recognised Overseas Pension Scheme, or QROPS is an overseas pension scheme that meets certain requirements set by Her Majesty’s Revenue and Customs (HMRC). A QROPS must have a beneficial owner and trustees, and it can receive transfers of UK Pension Benefits.
This is a great opportunity for regulatory / tax arbitrage.
For example, in Australia, they tax pension (superannuation) contributions on the way in, but then payments out of the pension are given favourable tax treatment. In the UK, payments into a pension scheme are tax free (up to a limit) on the way in, but pension payments that the scheme then makes when you retire are fully taxed. If you build up your pension pot in the UK, you do so out of tax free income. You can then transfer it under QROPS to Australia. Once it is turned into an Australian superannuation fund, it pays out to you in Australia, and you get tax benefits again 😊
This is not a specialist pensions site. If you are going to make pension investments
- A) Do your own research into the pension rules in your home country, as well as in the UK
- B) Don’t forget the importance of making the right pension investments. The tax benefits go only so far. Ultimately, what matters is making the right investments, AND (if not going for a Self Invested Pension Scheme, with single-stock investments) going for Index Funds OR choosing the right fund managers: Managers who have ‘skin in the game’ with lots of their own cash in their own fund, Managers who run a single-strategy(ie what they believe in, rather than offering something for every taste in the hope of catching as many customers as possible), and managers who don’t over-charge (Hedge funds with their 2+20 fee structure have been described as ‘a charging structure with an investment strategy attached’)