QROPS Rules
From 5th April 2006 the new pension reforms for UK personal and work pensions came into effect, allowing British citizens who were living abroad to transfer their UK pensions for the first time. When it comes to QROPS pensions however, which foreign pension schemes are allowed to offer this service are tightly regulated.
To qualify for a pension transfer into a QROPS the following QROPS rules apply and you must fall into one of these categories:
- Currently be a member of a personal or occupational pension fund
- Have been or expect to become a non UK resident for a minimum of 5 years
- Have not yet purchased an annuity
It is not possible to transfer your UK pension into a QROPS if:
- Your pension is a basic state pension
- You have already purchased an annuity
- You plan to remain tax resident in the UK
If you are not sure whether you can or can not transfer your pension into a QROPS, contact a QROPS adviser who will provide you with a free, no obligation consultation.
In any case, a qualifying recognised overseas pension scheme must apply to the HMRC for QROPS status. Only if it meets the HMRC´s standards will it be allotted a number. The pensions scheme must then meet the requirements laid down by Sections 150(7) and 150(8), plus certain criteria within Section 169, of the Finance Act 2004 to be considered suitable.
Among these dictates is one that states that the member is only able to draw from the pension once they hit minimum pension age. This is currently 50 years but will increase to 55 years on 6 April 2010. No less than 70 percent of the transfer must be used to create a lifetime income for the member, which means a lump sum of 30 percent may be taken. This is still more than the 25 percent allowed by UK pension schemes. Guidelines have also been set out by the Financial Services Authority as to how monies can be invested, such as in equities and unitised collective investments.
To check that an overseas scheme has QROPS pension status, UK scheme managers and members can check on the HMRC website. In addition, QROPS pensions are regulated by the country in which they are established and must be recognised there for tax purposes.
Click here for HMRC Approved QROPS Schemes
