The Qualifying Recognised Overseas Pension Scheme (Qrops) system was first introduced in April 2006.
It was designed to allow individuals permanently living overseas to simplify their affairs and enable them to continue to save to provide an income for retirement by transferring their UK pensions to a pension based in their new country of residence.
The system was intended to limit the lump sum and pension benefits available to the transferring individual to be broadly equivalent to the benefits that would have been available to them had they left their pension in the UK.
The government provides tax relief on contributions made to UK registered pension schemes, and investments made within those schemes are generally free from income tax and capital gains tax.
If a transfer is made from a UK registered pension scheme to a Qrops then, until recently, it has been free of tax (provided it does not exceed the individual’s lifetime allowance). More on this calculation later.
HM Revenue & Customs completed a review of the system in 2012 and found that Qrops were:
- being marketed primarily as a way to avoid UK tax;
- being used to facilitate early access to UK tax relieved pension funds;
- being used by some individuals, based overseas or in the UK, in countries bearing no relation to where they live.
This clearly contrasts with the original reasons for allowing transfers of UK pension schemes that have benefited from UK tax relief, to be made free of UK tax to a Qrops.
HMRC needed to be more confident that Qrops were being used as originally intended rather than for tax avoidance; so a number of updates to the regime have been made since then.
To learn more about QROPS and transferring your pensions, please check our Knowledge Base articles:
– What Are QROPS?
– Can I transfer my pensions to Australia?
– Can I transfer my pensions to New Zealand?
This news is originally posted by Charlene Young of FT Adviser
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