Applying to QROPS for UK Pension Holders

By: Amy Nutt

Are you a British expatriate who is tired of all of the government regulations that are holding your pension funds out of your reach? Do you wish there was a way for you to access your money more easily, without requiring you to pay high taxes on the money you do use? Because you are a British citizen who is currently living overseas, you have one option that most UK citizens do not have.

You can invest your money in a Qualified Recognised Overseas Pension Scheme, otherwise known as a QROPS. QROPS funds are foreign investment funds that have been approved by the HMRC. According to British law, expatriates who have been living overseas for at least five years can move their money from UK pension plans to a QROPS.

This money can then be access without the need to pay income tax, allowing expatriates to use their retirement funds without the expenses they would have by leaving them in the pension plan. Not only is the money tax-free in most situations, but the money in a QROPS can also be withdrawn in the currency of your choice, freeing you from the constraint of receiving your money in British pounds, which may not be useful to you where you are currently living.

If you are considering using a QROPS for your retirement funds, you should know the many benefits to this investment structure. Most expatriates choose a QROPS for the tax benefits. Most of the QROPS funds you will consider can be used without paying income tax on the money when you withdraw it. Additionally, the money you leave to your children or other beneficiaries in a QROPS is often free from inheritance tax.

This means you can leave more of your wealth to those you love when you die. In contrast, money that is in a UK pension plan is heavily taxed, both when you withdraw it and when your beneficiaries inherit it. UK pension plans require their owners to purchase annuities, which you may not feel is the best investment option for you to use.

A QROPS does not have this requirement. Because UK pension plans are localized, many of the funds that they invest with are domestic. If you are looking to diversify your investments by investing in more foreign options, a QROPS will allow you to do this. Since these are foreign investment options, they offer more choices when it comes to the securities placed within your fund.

With all of these benefits, are there any reasons not to put your money into a QROPS if you are qualified to do so? There are some potential drawbacks to moving your money from your British pension plan to a QROPS. First, there will be some cost involved. You will likely want to use a lawyer at some point to ensure that all of the paperwork is done correctly, allowing you to receive the most benefits from your transfer.

Hiring a lawyer is not cheap. Also, you will have to pay someone to oversee your accounts. This usually costs a small percentage of the total in your account. These costs, however, are usually outweighed by the tax savings you will receive by placing your investments in a QROPS. You will also need to realize that there are many different QROPS funds available for you to invest with, and some perform better than others. The amount you have available to invest will determine which funds are open for your money. However, you will still find quite a bit of difference between the various options available to you.

You will need to work with your financial advisor to determine which fund best fits your current investment goals, and you will have to realize that there is always a chance you will lose money. Before you decide to invest with a QROPS, take some time to compare the benefits to the potential risks to ensure that it is the best option for your retirement income.

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