Qualifying Recognised Overseas Pension Scheme
What is a Qualifying Recognised Overseas Pension Scheme, QROPS?
Since 6 April 2006, Her Majesty’s Revenue and Customs (HMRC) has allowed individuals to transfer their UK pension funds to Qualifying Recognised Overseas Pensions Schemes (QROPS).
A Qualifying Recognised Overseas Pension Scheme (QROPS) is a pension scheme, outside of the UK, that has been registered by the HMRC to accept transfers in from a UK pension scheme.
Basically, these regulations are designed to ensure that people who no longer live in the UK can only transfer their UK pension funds to overseas pension schemes that have comparable rules to UK pension schemes.
Without that registration with HMRC, an overseas pension scheme would not be allowed to accept a transfer from a UK pension scheme, however, the responsibilities of the QROPS does not end with just registering.
On the 6 April 2012, the HMRC amended and also introduced some new QROPS rules. The new QROPS legislation has introduced limits on the amount of the lump sum that can be withdrawn from a QROPS to a maximum of 30% of the scheme fund value. Also the QROPS reporting responsibility period has been increased from 5 years to 10 years from the date the UK pension funds were transferred to a QROPS.
In addition, the QROPS rules provide that at least 70% of a member’s UK tax-relieved scheme funds will be designated by the QROPS scheme manager for the purpose of providing the member with an income for life. The pension benefits payable to the member (and any associated lump sum) must be payable no earlier than they would be if pension rule 1 in section 165 Finance Act 2004 applied, this being age 55.
This reporting is in place to ensure that any payments made to an overseas pension member, whose pension funds have been transferred from a UK pension scheme, were receiving benefits broadly in line with what the UK scheme could pay.
Be aware of the QROPS Rules and Potential Tax Penalties: