QROPS, transfer your UK pension to France


Qualifying Recognised Overseas Pension Schemes were introduced in April 2006 as part of the Pension Simplification reform by HMRC. From that date, it became possible to transfer a UK pension fund outside the United Kingdom, on a overseas pension fund called QROPS. These transfers are considered by HMRC as « recognised transfers,” (no charges apply) and before HMRC allows a QROPS, the provider company must meet certain conditions and accept strict rules in place.

What are the obligations imposed by HMRC ?

To obtain  » QROPS  » status, a foreign pension fund must:

  • be established in a country or territory which regulates pension funds
  • incorporate rules stipulating that at least 70% of the pension fund is used to provide an income for life
  • prohibit the holder to access funds before the age of 55 (Minimum Retirement age in the UK)
  • be  » recognized for tax purposes » in the country or territory where it is established. This means that benefits or contributions , will be taxed.
  • be available to residents of the country or territory where it is established

In return for obtaining this status , which can be removed at any time, the QROPS supplier must provide HMRC each year, and for 10 years from the date of transfer , details of any transactions giving rise to a payment to its owner. The information required is :

a) the name and address of the migrant, or individual

b ) the date, amount and nature of the payment in question .

This is to prevent the QROPS from doing things that would not conform with HMRC defined pension rules.

Taxation of QROPS

Under the current rule , UK pensions do not permit the release of more than 25% of the accumulated funds at retirement (minimum age 55) . The remaining 75% will provide a lifetime income , which is taxable, whether the planholder is UK resident or not (although it is possible to ask HMRC that the income is paid gross , as long as you provide proof that you are totally taxed in the country of residence , and that the British tax authorities approve the tax system of this country).

A “traditional” QROPS can unlock up to 30% of the accumulated funds, which may or may not be taxed by the country of residence of the planholder.

Inheritance tax in a QROPS should enjoy the same protection as the UK pension fund. Funds should not be taxed during the savings phase. The tax payable will depend on the QROPS residence and residency of the planholder (QROPS holders should always seek advice from an independent tax advisor to truly know their tax position).

Who should consider a transfer ?

QROPS is a valid product for those who have already emigrated from the UK permanently, for people currently non-UK domiciled who intend to return, and for those who will emigrate from the UK permanently in a near future.

QROPS can’t be considered to those who remain domiciled and tax resident in the UK or those who intend to return to the UK permanently.

What can be transferred to a QROPS?

Most UK pension funds can be transferred to a QROPS, including “Protected Rights » benefits and those already in a « drawdown » plan. There are some exceptions such as the State Pension rights and most pension funds already in payment.

In all cases, it is advisable to seek advice from a qualified and regulated independent financial adviser  prior to such transfers.

What type of investments can I select in a QROPS?

Many QROPS providers impose investment restrictions. However, the majority of QROPS allow a great freedom and a great investment choice.

In general, it is possible to invest in the following types:

  • Stocks, bonds , alternative investments , hedge funds, structured products & Deposits accounts
  • Private Equity – held indirectly through an offshore company that is separately kept
  • Real Estate – Held indirectly through an offshore company that is separately kept

It is important to note that the assets may be held in any currencies.

What can I withdraw from my QROPS?

At retirement (minimum age 55 years in the UK), a QROPS can pay up to 30% of the accumulated pension fund in « cash » (known as « Pension Commencement Lump Sum » ( PCLS ), formerly knowns as « Tax Free Cash » ( TFC )), provided that no similar payment was previously made in the UK. Comparatively, a UK pension only allows the release of 25% of the accumulated capital. With regards  to existing income being paid through a “Pension Drawdown”, for transfers of these plans on a QROPS the new plan will  need to provide the same level of benefits as those previously given.

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