Individuals can, under certain circumstances, move their pension benefits from a UK pension scheme to a pension arrangement overseas through a Qualifying Recognised Overseas Pension Scheme (QROPS).
The HMRC QROPS list, now known as HMRC ROPS list, is maintained by HM Revenue and Customs. It is a compilation of pension systems from other nations that includes the ones that are qualified to receive transfers from pension funds in the UK.
In order to be listed, these schemes have informed HMRC that they comply with ROPS conditions.
The scheme must not be based in the UK and adhere to certain regulations, such as being accessible to citizens of the country of establishment and being registered as a pension system with the relevant tax office in that country.
Anyone looking to move money from a UK retirement fund to a QROPS pension scheme or another offshore retirement plan, as well as those foreign pension providers, will find this compilation useful. Included are pension plans that meet the requirements for ROPS and come from a variety of countries.
Importantly, in 2017, the criteria for ROPS were revised. Hence, it is critical to ensure that the proposed transfer plan is in line with the revised requirements.
Anyone thinking about moving their pension money from the UK to a ROPS would do well to consult the QROPS list HMRC. Pension schemes that have sought inclusion on the list and met the requirements are detailed there.
Nevertheless, keep in mind that neither the ROPS character of these plans nor the exempt status of transfers to them from UK taxation are guaranteed by HMRC. Therefore, before starting any transfers, it is essential to conduct thorough study and get competent counsel.
Let’s learn a bit more about QROPS and ROPS before we tackle the HMRC approved pension schemes list.
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Table of Contents
QROPS vs ROPS
Both ROPS and QROPS are overseas pension schemes, but the difference between the two is the level of certainty that HM Revenue and Customs gives about their eligibility and compliance with certain requirements.
In order to be classified as ROPS, a pension scheme must meet the criteria set out by the relevant legislation. The scheme manager is responsible for notifying HMRC that the scheme satisfies the ROPS criteria, as this categorization is based on factual assessments.
While the scheme manager is responsible for providing HMRC with information regarding the scheme, HMRC does not provide a guarantee that ROPS completely meet qualifying requirements. In this sense, a QROPS may offer more certainty than a ROPS.
A QROPS confirms compliance with qualifying conditions and promises to provide HMRC with information regarding member payments. Though it is basically a ROPS, the scheme management has provided extra documentation and certifications to HMRC, confirming that the plan satisfies the special criteria for QROPS designation. This increases the level of assurance offered by QROPS.
HMRC QROPS List 101
How frequently does HMRC update the ROPS list?
According to the official guidelines on the ROPS notification list, which can be found on the UK government website, the list is updated twice a month, on the 1st and the 15th.
Pension providers and retirees abroad thinking about moving their pension funds from the UK to a QROPS scheme or from one offshore pension plan to another can find the most up-to-date information on this page, which is revised on a regular basis.
How to check pension provider inclusion on the HMRC ROPS List
If you want to know if your pension provider is on the ROPS list, you can check the official HMRC website. Every month (on the 1st and 15th), they provide an updated compilation of recognised overseas pension scheme notifications.
Pension schemes that have notified HMRC that they meet the requirements to be considered a ROPS and have shown interest in being included on this list can be found. You can sort the pension providers by nation. If you’re still confused, see your advisor or contact HMRC for clarification on the QROPS location.
Criteria for pension provider addition to HMRC ROPS List
To be listed on the list, a pension provider must meet the following HMRC QROPS rules:
- Fulfilling ROPS Requirements: The first step for any pension system that wants to be called a Qualifying Recognised Overseas Pension program is to get recognized as a ROPS. If a pension scheme follows the rules set down by law, it might be considered a ROPS.
- Informing HMRC: In order for a pension scheme to be eligible to be a ROPS, its manager must inform HMRC of its eligibility. If the scheme manager wants the plan to be recognized as a ROPS, this notification is vital because it is a factual test.
- Due Diligence: Plan administrators of registered pension schemes and foreign pension plan managers can check the official ROPS notifications list to see if a firm has notified HMRC that it meets the requirements to be a ROPS. Their due diligence procedure includes this check.
- Persistent Compliance: The scheme must continuously fulfill the requirements to be a ROPS in order to remain on the list. The plan might be taken from the list if it doesn’t follow these HMRC pension rules.
Note that HMRC has not guaranteed that it has carefully reviewed all submitted information for any identified plan just because it is on the public list. Furthermore, simply because an entity is on the list doesn’t mean a QROPS pension transfer to that entity will be free of UK tax rules.
Consequently, before making any transfers, pension providers and retirement savers must conduct extensive study and consult with professionals.
Is there a minimum to transfer UK pension to QROPS?
As per HMRC QROPS guidance, there is no set maximum amount that can be transferred. A person’s financial condition and the specific QROPS/ROPS determine the minimum amount needed to transfer a UK pension to that plan.
The charges assessed for moving a UK pension to a QROPS potentially include the following:
- International Transfer Fee: An income tax levy equal to 25% of the transferred value referred to as the Overseas Transfer levy may be imposed on monies transferred to a QROPS. Unless certain requirements are satisfied, such as residing in the same nation as the QROPS or an EEA country where the QROPS is employed, this fee will be applied.
- Costs of the Scheme: Businesses that offer QROPS may charge for various services, including administration and investment management. The specific QROPS and the scope of services provided determine the amount of these costs.
How to revise pension provider information on HMRC ROPS list
The “Qualifying Recognised Overseas Pension Scheme (QROPS) – Change of details” form can be found on the HMRC website and can be used to update the information of your pension provider on the ROPS list.
This form, identified as APSS251A, is specifically designated for the scheme manager of an overseas pension scheme to communicate any alterations to the scheme’s particulars. These modifications may include adjustments to the scheme manager’s details, alterations to the scheme’s name, address, contact details, or notification if the scheme no longer qualifies as a QROPS.
Ensuring the accuracy and currency of the provided information is crucial to comply with HMRC requirements.
Tax considerations for moving a UK pension to a QROPS/ROPS
A number of tax considerations arise when a UK pension is transferred to a QROPS or ROPS, including the international transfer charge, an income tax fee that we mentioned earlier.
Other levies that may be imposed:
- The Income Tax: There may be tax benefits to QROPS and ROPS, such as the possibility of receiving income tax-free in the UK and reduced pension income taxation depending on the new country of residence. Tax treatment, however, differs according to the individual’s country of residency and the QROPS/ROPS jurisdiction. To understand the tax implications, it is vital to get experienced tax guidance.
- Lifetime Allowance: You may be able to avoid paying taxes in the UK in the future, including the Lifetime Allowance (LTA), by transferring to a QROPS or ROPS. The 25% excess tax on QROPS/ROPS growth is not applied if the value exceeds the UK Lifetime Allowance. People who are getting close to or have already passed the LTA may benefit from this.
- Inheritance Tax: Due to their operations outside of UK jurisdiction and tax regulations, QROPS/ROPS can offer protection from UK inheritance tax. This can be helpful for transferring residual pension money and for estate planning.
What are the pros of UK pension transfers to QROPS/ROPS?
Among the many advantages of moving a pension from the UK to a (Qualifying) Recognised Overseas Pension Scheme are:
- Tax Advantages: A QROPS allows you to avoid paying a tonne of tax in the UK when you move your pension to one. Withdrawals are subject to UK income tax at the source, and there is no upper limit on the lifetime allowance. The 25% excess tax on lifetime allowances does not apply to QROPS growth beyond the UK Lifetime Allowance. Moving your pension funds to a QROPS is a wise decision if your assets are close to a million British pounds.
- Flexibility: You’d have more leeway to collect your pension benefits whenever you like after turning 55 if you transferred them to a QROPS.
- Merging savings: if your employment or residence has taken you to more than one country, you may have amassed more than one pension fund. Your retirement funds can be more easily managed if you transfer them to a QROPS.
- UK Inheritance Tax protection: You won’t have to worry about paying UK inheritance tax if you move your money to a QROPS because they aren’t subject to UK law or tax regulations.
- More Investment Options: Compared to UK pensions, QROPS can provide a broader selection of investments, allowing you more freedom with your retirement funds.
- Currency Management: Managing pension funds in the currency of one’s country of residence might help persons living or retiring abroad reduce currency risk. QROPS/ROPS can give this capability.
What are the cons of moving UK pension to QROPS/ROPS?
Warnings about potential pitfalls when transferring a UK pension to an overseas QROPS include:
- Tax Considerations: Placing your pension funds in a foreign location can bring about significant tax considerations in both your home country and the country where your QROPS is situated. You should consult a skilled tax advisor to learn about the tax consequences of moving your pension to a QROPS, since the requirements differ from country to country.
- Be Wary of frauds and Mis-selling: QROPS have been deceived and utilized in numerous frauds; weigh the dangers and do your homework before deciding on a course of action for your pension. Since QROPS are willing to pay out substantial commissions to financial advisors, an activity that is currently illegal in the UK, offshore financial advisors tend to favor them. There is no benefit to the end user because QROPS regulation is typically less stringent than UK legislation.
- Early Disbursements: You are still subject to UK tax laws even after transferring to a QROPS, so it’s important to plan ahead for early withdrawals. You may still be subject to a 55% tax penalty if you take benefits from your QROPS before you turn 55 since, for a full decade after a transfer finishes, your pension provider is required to disclose any unauthorized withdrawals to HMRC.
- Investment Risk: Compared to UK pensions, QROPS have more investment possibilities, but this also increases the level of investment risk. Make sure you know what you’re getting into with a QROPS in terms of investing opportunities and hazards before you send any money.
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