QROPS stands for Qualifying Recognised Overseas Pension Scheme. These are non-UK schemes that have been declared to HMRC which then fit the QROPS criteria and should be recognised as such.

Living offshore and transferring a UK pension offshore can possibly help an individual to avoid paying higher tax rates than if they stayed or kept their pension in the UK.

On the 6^th April 2006 also known as A-Day, the British government bought in sweeping changes to the pension system affecting anyone with a UK Personal or Corporate Pension.

The idea was to simplify the hugely complex system for UK personal and corporate pensions and to relax the rules governing how much and how we pay money into pensions schemes. The new rules apply to all personal and employer paid pensions, bringing them all into line for the first time.

Pension A-Day changed the way that you can draw your pension and the date at which you can receive the benefits forever, below you will see the fundamental differences between UK resident pensions and a QROPS.

UK Resident Pension

• You are now able to draw part of your pension from a company scheme when you are still working full or part time for the same employer.
• UK Residents – Many pension schemes now offer pension commencement lump sum, meaning you can take up to a quarter of your pension as long as it is less than 25% of your lifetime allowance. This was originally £1.8 million up until 2012, lowered to £1 million on 6 April in 2016.
• From 2010 the minimum age for receiving your pension increased from 50 to 55.

In a case when a non-UK resident has a UK source of income or receives payment from a UK Registered Pension this person is obliged to pay UK tax at marginal rate, unless there is a Double Tax Agreement with their country of tax residence and the UK offers exemption from UK tax on such income.

QROPS

As mentioned earlier QROPS offers an opportunity to improve an individual’s tax position on their pension. I would like to now share with you who is eligible to apply for QROPS and what kind of benefits you may gain.

1. Any person who is planning or already retiring overseas and becoming resident in a foreign jurisdiction or country for five years or more.
2. Furthermore, in order to get benefits from QROPS, an individual does not have to leave the UK forever. An individual can continue his/her visits to UK, but must stay as a non-tax UK resident.

Below are the main fundamental points about QROPS:

• You can consolidate all of your pensions into the same account and reduce your fees
• Currently you are able to take up to 30% commencement lump sum in Gibraltar & Isle of Man at aged 55 and currently 25% in Malta.

However, if the QROPS contains UK tax relieved pensions funds and the member is UK tax resident, or has been UK tax resident at any time inside the previous five full complete and consecutive UK tax years, the maximum lump sum is limited to 25%

• You can potentially draw down up to 150% of GAD each year, depending on your jurisdiction – Or flexible drawdown in Malta
• A QROPS member is not subject to death tax if he dies after the age of 75 and has lived out of the UK for 5 full tax years, while UK resident is liable to a flat rate tax charge of 45%.
• You can possibly withdraw monies tax free from a QROPS depending on jurisdiction or at a lower tax rate.
• You have access to thousands of investments, as opposed to a limited number at present
• You have complete control with regards to currency

There are various QROPS jurisdictions for investors and the best location for transfers depends on the result each individual is looking for. Most common jurisdictions for QROPS are Malta, Gibraltar and Isle of Man.

The fiscal laws vary from one jurisdiction to another, therefore the key point in choosing jurisdiction is the future location for retirement.

I would like now to compare the key features of these jurisdictions.

As you can see, Malta relies heavily on its extensive range of Double Tax Agreements (a full list can be obtained from the Maltese Financial Services Authorities. http://www.mfsa.com.mt/pages/viewcontent.aspx?id=196.

Unlike Malta, Gibraltar does not have an extensive range of Double Taxation Agreement and instead applies a flat income tax of 2.5% on income payments from a QROPS. The Isle of Man is similar to Malta as the income tax rate is dependent on whether there is a DTA in place with the country the individual is tax resident in when he draws an income.

As it can be observed QROPS is a complex system where regulations vary based on the jurisdictions, however circumstances change and you are able to switch to a more suitable jurisdiction if required. Furthermore, not everyone will take advantage from transferring their pension funds overseas.

Farringdon Group and their team of expert advisors can assist in pension valuations and whether it is beneficial for you to move a pension offshore and we are always happy to discuss this with you further.

 If you need any assistance please contact us at syeomans@farringdongroup.com

I hope that you have enjoyed reading this post.

Stuart Yeomans 

CEO

Farringdon Group

Kuala Lumpur : Malaysia

The pound fell to an eight-week low today while the cost of hedging against big swings in its exchange rate against the euro over the coming month hit a record high, this happens with 48 hours remaining on Britain voting whether to remain in the European Union.

Betting markets suggest the possibility of the option to remain in the EU is high but some recent polls have shown a lead in the Brexit option, causing anxiety amongst investors.

The “volatility index” – a measure of investors’ uncertainty – has hit levels last seen in the 2008 financial crisis.

The pound was down 0.2% against the dollar at $1.4226. Against the euro, sterling was down 0.6% at €1.2605 and weakened by 1 % against the Japanese yen to just over 151.

A senior analyst at IronFX Global, Charalambos Pissouros expected that incoming polls would move the pound more aggressively than before. If the new polls continue to show a tight race between the two campaigns as the voting day approaches, resulting in even more uncertainty and thus, volatility in sterling is likely to heighten further.

Hedge funds and asset managers are increasingly seeking to protect their exposure to UK markets through derivatives.

Data suggests speculators are adding to bets against the pound with short positions at their highest in at least three years.

A lot of analysts reckon a vote to leave the EU on June 23 would jolt Britain’s economy and send sterling tumbling by 15-20%, while a vote to stay would be likely to drive the currency sharply higher.

The Brexit issue has dominated the market since late last year, driving a decline of more than 10% in sterling on a trade-weighted basis between the middle of November and the middle of April.

The equivalent sterling / dollar one-month implied volatility rocketed to 28.15 percent, close to its 2008 peak of around 29 percent.

I hope that you have enjoyed reading this post.

Stuart Yeomans 

CEO

Farringdon Group

Kuala Lumpur : Malaysia