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So what is a QROPS or ROPS ?
A ROPS (formerly known as QROPS) is a Recognised Overseas Pension Scheme and may be relevant to you if you are resident in the EEA (defined as the EU plus Norway, Liechtenstein and Iceland) and intend to remain resident in the EEA for 5 full years after your pension transfer.
A recognised overseas pension scheme is a pension plan that is recognised under UK HMRC rules to accept transfers from UK pension schemes.
If you have move abroad, or are thinking of moving abroad in the near future, you have the option to transfer them to another pension scheme, which could be based abroad and may offer benefits more suitable to your future life requirements.
Who is a ROPS designed for ?
Anyone with a UK personal personal and/or occupational pension scheme and who has either left or, is planning to leave the UK in the next 12 months and living in the EEA and will continue to do so for the next 5 years.
If you fall into the above category you can maximise the control, growth and income potential of your pension, rather than be limited to the restrictions of a UK pension scheme and the lifetime allowance restrictions.
Pension funds can be passed down to family members free of UK Inheritance Tax (IHT) and scheme charges on death at any age. If a member dies whilst being a member of a ROPS (and after being non resident for 5 complete tax years) then no UK scheme charges are reportable to HMRC. Additionally, in February 2010 legislation introduced Qualifying Non UK Pension Schemes (QNUPS). By definition a ROPS is a QNUPS and is entitled to an exemption from UK IHT.
Potential Benefits of a ROPS
For expatriates, this special pension scheme can hold several advantages over a regular UK pension plan:
HOLD/INVEST YOUR PENSION FUND IN YOUR CHOSEN/RESIDENCE CURRENCY
Instead of being restricted to GBP in the UK, a ROPS allows you to hold and invest your funds in a different currency – for example, if you have or intend to relocate elsewhere in Europe and the Euro is the local currency, then you may wish to hold your investments in Euro.
AVOID UK TAX ON YOUR PENSION INCOME
Whereas the UK government may charge as much as 45 per cent tax on your pension funds, with a ROPS, it may be possible not to pay any tax, depending on your country of residence.
EXEMPT YOUR FAMILY FROM TAX AFTER YOUR DEATH
Whereas, according to current UK pension rules, your beneficiaries will still need to pay tax on their inheritance if you die over the age of 75, this isn’t the case with a ROPS. This special pension scheme will charge no tax on your inheritance, regardless of your age.
BENEFIT FROM UNLIMITED LIFETIME ALLOWANCE
Your lifetime allowance defines the maximum amount of benefit that you can draw from your pension fund. Currently in the UK, the lifetime allowance is GBP 1.055 Million, and this amount has been decreasing incrementally for several years (it reached a high of GBP 1.8 Million in 2010).
A ROPS, on the other hand, has an unlimited lifetime allowance, allowing your pension fund to grow to any size without being charged tax.
POSSIBILITY TO WITHDRAW A HIGHER LUMP SUM ON RETIREMENT
A ROPS may allow members to take up to 30 per cent PCLS (Pension Commencement Lump Sum) from their pension fund (dependent on the jurisdiction it is being held). In the UK, the tax-free lump sum cap is set at 25 per cent of the pension value at drawdown.
Is a ROPS suitable for you?
A ROPS may provide a tax advantageous alternative to a UK pension scheme in appropriate circumstances for an individual with a UK pension fund who has emigrated or is intending to permanently emigrate, and for UK residents in certain circumstances. ROPS trustee selection should take into account adherence to HMRC regulations, as well as the jurisdiction as a whole. Consideration should also be given to the benefits, rules and local tax implications that may apply.
t is important that advice takes into account the relative merits of all options available to you the member, and the personal circumstances of you and your family.
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