The QROPS pension scheme is a very good option for UK professionals who want to transfer their UK pension funds to a foreign country where they wish to settle down after retirement. This offshore pension scheme allows the pension holders to escape from the strict tax regime of the UK government. The plan allows the pension holder, whether he is a citizen of UK or a foreign professional who has worked in the UK, to draw money from a UK pension fund from abroad.
Though the QROPS pension scheme is not taxable by the UK government, it comes under the tax rules of the country in which the scheme is based. While the scheme has several benefits, transferring ones pension fund to a foreign country involves some expenses. Therefore, if the total value of the pension fund is less than 30,000, then the fund transferring expenses will be far greater than the benefits.
Nevertheless, the QROPS pension is a wonderful scheme, which allows UK professionals retired overseas to draw money easily from their pension fund. Her Majestys Revenue and Customs has a list of approved pension providers in many countries. The investors usually transfer their pension funds to those countries that have favorable tax regulations. Guernsey, New Zealand, the Isle of Man and Ireland are popular destinations among QROPS investors, due to their lenient tax regulations. While all other countries allow a pension holder to withdraw only 25% from their pension fund, Guernsey allows investors to withdraw 30% from their fund. All withdrawals within the first five tax years have to be reported to the HM Revenue and Customs by the pension providers. During this period, if any QROPS pension holder is found withdrawing more than the rules allow, a 40% tax penalty with an additional 15% surcharge will be levied on the unauthorized withdrawal. Therefore, an investor should take the help of a QROPS adviser to decide the plan that best suits him.
A QROPS pension scheme has several additional benefits:
You need not buy an annuity
You can invest in a wide range of products, markets and currencies
With proper planning, you can pass on the fund to your family members
QROPS is designed to give an investor settled abroad similar tax benefits as he would get from a UK based pension scheme.
Several investors fall for wrong advice, and believe that they can take out the entire fund amount in cash and that too tax-free, etc. To avoid such problems, take advice only from an independent and UK regulated QROPS Pension advisor who is well versed with the rules.
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