How To Open A QROPS Offshore Pension

Expats who want to free themselves from onshore pension providers and who want to take control of their retirement planning may find a Qualifying Recognised Overseas Pension Scheme (QROPS) is right for them.

A QROPS is a souped up pension plan that lets a saver make important decisions about their own pension fund such as where and how to invest.

QROPS work in a similar way to an onshore self-invested pension plan (SIPP).

UK pensions have drawbacks for expats. They tend to pay out in Sterling, which can mean issues over exchange rates. They can restrict investment choice to a range of funds run by their own managers.

However the power and flexibility of a QROPS comes with responsibility.

For investors who have the time and inclination to research the markets, understands diversifying funds and has the time to act as a fund manager, then QROPS is an ideal choice.

What is a QROPS?

QROPS are a pension wrapper. That means a QROPS is a set of underlying rules that run your pension, while the retirement saver or a fund manager look after the business end of growing the pension pot.

Some offshore pensions come in a QROPS Lite format, with fewer funds and a fully-managed option for less experienced investors with smaller pots who do not have the time to manage their own money.

The larger market is for transfers in of pensions worth £100,000 or more.

These larger funds have a full menu of investments, from property, shares, bonds and commodities spread across many world markets and currencies.

A bonus is both types of QROPS shield your money from the tax man and tinkering by the government.

Starting a QROPS

Starting a QROPS is not complicated.

Providers will want to see an investment recommendation from an international IFA, and as the market offers around 1,000 pensions in more than 40 financial centres, the help of an experienced and knowledgeable regulated advisor is a must.

Investors must live permanently outside of the UK and have one or more onshore pensions.

QROPS are available to British expats and investors from other countries that have pension savings in the UK.

Transferring cash from a UK pension to a QROPS is like switching pensions onshore.

You get a transfer value from the pension provider; go through a risk and assessment process with the international IFA who matches you with a short list of suitable offshore pensions.

Providing the offshore pension is on the HM Revenue & Customs (HMRC) QROPS List, the money is switched offshore and you are in charge of your money.

1 COMMENT

  1. Sipps are well regulated, some with extensive FX options and with low cost platforms for thousands of funds that are ideal for the retail market. The extra investments allowed by QROPS are usually unregulated, high commission earning and illiquid funds that are not suitable for the vast majority of investors.

    The Lite format means the funds need to go into a costly life insurance wrapper. High commissions, limited fund choice, anything but Lite.

    I would suggest the market for QROPS is for very much larger cases of funds that are several hundred thousand pounds in size as the high costs of QROPS are not for smaller funds. Sipps costing a fraction of the price.

    The advice for QROPS is extremely complicated, especially taking into account double tax agreements, local pension laws, ultimate retirement destination and transfer analysis for schemes with guarantees that can only be dealt with by UK qualified and UK regulated advisers.

    QROPS like Sipps only shield tax (and not always!!! ) until retirement. After that, the tax rules of the DTA will come into play. There is often no tax advantage over a Sipp. This is a myth spouted by the QROPS market.

    Transferring to a QROPS is NOTHING like transferring to a Sipp. UK pensions are highly regulated, there is no Sipp list that can suddenly be changed to remove QROPS or whole countries off the HMRC list.

    Providers will not want to see a recommendation from an International IFA??? Where did you find that? Make sure your international IFA is suitably regulated, qualified, experienced and insured and do your due diligence on them.

    You are not in charge of your money when it is in a QROPS, the QROPS trustee is in charge and you cannot do anything with your money without the approval of the trustee.

    How about rewriting this article?

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