There are huge benefits for expatriates who transfer their UK pensions to a QROPS but there can also be pitfalls as well.

Here is a list of some of the main points:

Lump Sum Benefits
If you transfer your benefits to a QROPS you may take 25% of your total fund as a tax free lump sum and an additional 5% which is taxable. You can only take the additional 5% if you have been left the UK for 5 years or more. Under present HMRC rules to qualify for the lump sum option you must be age 55. Your remaining fund is then used to pay you an income for life without having to purchase an annuity.

Pension Investment Fund Performance
Many UK pension funds are now performing extremely poorly and in a lot of cases not even keeping up with inflation. This is eroding and reducing the value of your pension fund when you could be enjoying far higher tax free growth. If you decide that Qrops is right for you then your money is placed in an offshore account with tax free growth and the highest levels of Government backed investment protection anywhere in the world. We will either advise you on the best possible fund or funds to suit your personal individual attitude to investment risk or you can choose your own funds which may be changed at any time.

I Never Contributed To The Pension Scheme Myself!
Even if you never actually contributed any money to the UK pension scheme yourself that does not matter. You are still entitled to transfer any benefits that are in the scheme into your own personal QROPS even if only your employer contributed.

No Liability to UK Tax on Pension Income
A non UK resident drawing a UK pension remains subject to UK tax on the income, unless he or she resides in a country with a double tax treaty with the UK that contains an article on pensions. If the member resides in a country with no double tax treaty with the UK, they may be subject to a higher tax rate than the top rate of tax in their country of residence. Transfer to a QROPS ensures that, if tax is due on pension income, it will only be taxable in the country of residence.

No Requirement to Purchase an Annuity or Alternatively Secured Pension
There is no requirement to ever purchase an annuity with your UK pension fund if you transfer your benefits into QROPS!

Members of UK registered pension schemes can currently defer taking their pension until they reach age 75. However, once the member turns 75, they must either buy an annuity to provide an income for life, or opt to take an ASP. Either way, the member is required to take an income regardless of whether they need it or not. The UK rules also limit the scope to leave the fund to the member’s heirs.

Depending on the specific scheme rules, transferring to a QROPS may allow the member to continue to defer taking a pension beyond age 75.

Secure Your UK Pension Pot!
Defined benefit schemes in the UK form part of the balance sheet of the company, this is a huge risk to your pension fund.

(125,000 British people lost 100% of their UK pension monies due to liquidation of their respective employers)

Ability to Leave Remaining Fund to Heirs
The standard UK pension’s legislation significantly restricts the member’s ability to leave the pension fund to their heirs on death. If a member is drawing an unsecured pension prior to age 75, the remaining fund can be paid as a lump sum to heirs, less a tax charge equal to 35% of the lump sum. If the member dies after age 75 in ASP, then any lump sum paid to heirs is potentially liable to inheritance tax at 40%.

Furthermore, the payment can also become liable to an authorized payment charge, an unauthorized payment surcharge and a scheme sanction charge, which can result in a total tax liability equal to 82% of the fund value.

QROPS can help. Transferring the UK pension to a QROPS may allow the member to leave lump sums without deduction of tax to heirs.

Currency
A standard UK pension will usually only pay in Sterling, which means the member runs an exchange rate risk in respect of pension income, in addition to incurring charges in order to convert the pension payments to the currency of their country of residence.

Transferring to a QROPS means that the pension payments can be made in the local currency, thus eliminating exchange rate risk.

Lifetime Allowance Charge
This is a restriction on the total permitted value of an individual’s total accrued fund value in UK registered pensions, currently £1.8m. Those who exceed this value face a potential tax liability of 55% on the excess funds on retirement.

Pension Schemes That Can Be Added To QROPS
PERSONAL PENSION/FINAL SALARY PENSION/MONEY PURCHASE/SECTION 32 And Section 226/FURB/URB/CIVIL SERVICE SCHEMES/ARMED SERVICE/PROTECTED RIGHTS/GMP.

Potential Pitfalls of Transfer to a QROPS
Whilst there are sound reasons why a transfer to a QROPS is beneficial to individuals, there are several pitfalls you need to be aware of. For example:

Charges
Until recently the cost of the transfer and the management of the funds prohibited those with small pensions from utilizing Qrops. Yourlostukpension.com has negotiated preferential charging structures with many of the leading Qrops Providers around the globe. It is now cost effective for anyone to transfer into a Qrops. From as little as £25k can be transferred with no upper limit.

Loss of Protected Rights
Transferring to a QROPS may result in the loss of certain protected rights, including contracted out rights, or rights accrued under a defined benefit scheme. Yourlostukpension.com will outline all pros and cons of transferring to a QROPS relating to you situation.

Returning to the UK
If you return to the UK, the UK pensions legislation will apply to the scheme. This is something that should be fully planned and Yourlostukpension.com can explain in full to you.