What Is QROPS?

What Is QROPS?

What Is QROPS?

An acronym for Qualifying Recognized Overseas Pension Scheme, QROPS is a pension scheme for anybody who is entitled to a UK pension, but wishes to settle down outside the UK after retirement. Any UK citizen who wishes to settle abroad after retirement or any foreign professional, who has worked in the UK and is eligible for a UK pension scheme but wishes to avail the pension benefits from his home country or anywhere outside of the UK, can use this scheme.

Earlier the UK government's strict tax regulations proved to be a big barrier to professionals wanting to retire abroad. Before April 2006, the UK government heavily taxed any transfer of UK pension funds to an overseas location, thus totally upsetting a professional's retirement budget. Now, the QROPS enables a professional to transfer his pension money into such a scheme and retire outside of the UK in a foreign country, avoiding taxation under the UK's income tax rules and regulations.

QROPS is located in several countries, where it is recognized. Although these schemes can be located anywhere in the world, it has to abide by the regulations laid down by Her Majesty's Revenue and Customs. In fact, the schemes need the approval of Her Majesty's Revenue and Customs. In the countries where the schemes are located, they are usually taxable according to that country's local laws.

During the first five financial years of the scheme, if the pension holder makes any withdrawal in the foreign country, the QROPS authorities must inform the HM Revenue and Customs about it. If the pension holder returns to reside in the UK within these five years, the HM Revenue and Customs would tax him. However, after the passing of five years, the HM Revenue and Customs need not be notified about any withdrawals from the pension fund.

Before enrolling for the scheme, it is prudent to take professional advice from a QROPS specialist. Different countries have different tax regimes based on which tax would be levied on your pension scheme. Similarly, this scheme may not be suitable for everyone as those who opt for the final salary scheme for pension, may have to surrender certain benefits with the transfer of funds out of the UK.

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