Usually whenever anyone works in the UK, they will build up contributions into a UK Pension Scheme. This could be by way of either; their employee contributing on their behalf, the employee contributing, or both the employer and employee contributing into a UK Pension Scheme. Subsequently when they leave the UK, the pension contributions they have accumulated, are left behind and remain in the UK Pension Scheme. There are significant benefits that could be obtained by transferring your UK Pensions into a QROPS.
However it is important to note that there are downfalls to a QROPS including a newly introduced transfer fee that will set you back 25%.
A QROPS is a Qualifying Recognised Pension Scheme, commonly used by expats living in countries such as Switzerland, Denmark, Sweden, the Netherlands, and France. It allows you to pick up your pensions from the UK and transfer them into another jurisdiction.
Prior to 2006, anyone who left the UK would leave their pensions behind. Basically, this pension would be dormant, as they would no longer being any contributions being made, and would remain dormant until the member reached their retirement age, usually 65. So the individual would still have to follow UK pension rules even if they have since left the UK.
This all changed in 2006 with the introduction of QROPS, which is an approved HRMC scheme.
Transferring your UK Pensions into a QROPS allows you to take greater control of your money and gives you much greater flexibility and options of an overseas jurisdiction. At the same time, a QROPS gives you the security of a system legally recognised by the HMRC.
Transferring a UK pension can prove to be a lucrative move. There’s a lot to consider, but with the right advice it can be a seamless process that could pay dividends in the long run.
If you’re no longer working or living in the UK, then there are some significant benefits in transferring your UK pension into an International Pension. Here are some of the main advantages:
As previously mentioned, while there are certain benefits with a QROPS, as of March 2017, transfers outside of the EU or EEA are subject to a 25% transfer charge. Therefore while QROPS is not totally closed it is only advisable in specialised cases. An alternate option to a QROPS is a SIPP - or self-invested personal pension - which you can read more about here.