skip to main content

QROPS Overview, Explanation and Advice

A QROPS is an overseas pension scheme which can give additional freedom to expats still holding pension funds in the UK

Last updated 6 October 2021 at 11:40

This detailed overview of QROPS is designed to provide an independent overview of QROPS and overseas pension transfers.

A Qualifying Recognised Overseas Pension Schemes, or QROPS, is an overseas pension scheme that meets certain requirements set by HM Revenue and Customs (HMRC).

A QROPS can receive the transfer of UK Pension Benefits in the vast majority of privately administered personal or corporate pension schemes, without incurring an unauthorised payment and scheme sanction charge.

To qualify, a QROPS must behave as if it were a UK pension for investors who have been UK resident in the previous five tax years. If you return to the UK, the QROPS will become subject to UK pension regulations.

However, for investors who have been non-resident in the UK for at least five tax years, the QROPS becomes subject to the laws of the overseas jurisdiction in which it is based. Consequently, you can take income with no limits and there will be no deduction of tax at source (although taxation will apply in accordance with your current country of residence).

Is a QROPS right for you?

When it’s broken down, British Expats have two choices when it comes to managing existing UK pension schemes:

  • Option 1: Leave the UK and retain your workplace or private pension with a UK provider
  • Option 2: Transfer the UK pension funds into a QROPS

There are other alternatives and variants of course, but generally the options come back to these two.

QROPS can provide an opportunity for people to unlock significant benefits from their pension, including enabling them to avoid tax in the UK by transferring their pension to a QROPS.

Defined benefit pension schemes and QROPS

If you have a defined benefit pension scheme, you may also wish to read our detailed overview of defined benefit schemes, which also looks at potential reasons why a QROPS transfer may or may not be a suitable option for you.

Who is eligible for a QROPS?

Typical scenarios are where a UK resident leaves the UK to emigrate (or to retire abroad) having built up a pension fund within a privately administered scheme or when a person born abroad who has spent some time working in the UK and built up benefits in a UK Pension Scheme decides to return to their home country with an expectation of then retiring there.

The QROPS does not have to be established in the new country of residence, thus providing greater flexibility and stability, along with a wider choice of scheme provider. To become a QROPS, a pension scheme must apply to and be approved by HMRC. A list of QROPS that have consented to have their names published is available on the HMRC website and is regularly updated.

Overseas transfer charges

On 8th March 2017, the UK government introduced a new overseas transfer charge which could affect many QROPS transfers which were requested on or after 9th March 2017.

To find out more, please read our detailed article covering overseas transfer charges >

Benefits of a QROPS

For those considering using a QROPS to unlock a pension scheme, you can look forward to enjoying a number of benefits.

Tax benefits of a QROPS

Income from UK pension arrangements is subject to income tax. It is collected as a withholding tax at 20%, and this tax is applied to everyone in receipt of UK pension income whether or not they live in the UK and with no exemption for foreign nationals.

No maximum Lifetime Allowance

Any growth in value of the QROPS above the value of the UK Lifetime Allowance (£1,073,100 2021/2022 to 2025/26) paid as a pension, will escape the 25% Lifetime Allowance excess tax charge. This charge would otherwise apply to any pension paid from a UK registered pension scheme to persons who are UK resident or non-resident for less than five years where the value of the pension exceeds the Lifetime Allowance.

Inheritance and estate planning

As a QROPS is not under UK jurisdiction or tax laws, transferring your funds to a QROPS provides you with protection from UK inheritance tax – although your beneficiaries may be subject to local inheritance tax rules.

Overseas pension schemes will usually ensure that residual pension funds pass to the intended beneficiaries much easier and quicker than would be the case in the UK.

Dealing with the question of what happens on death for expats with a QROPS is more straightforward.

The nature of the scheme means that the pension fund is outside of the pension holder’s estate for the purposes of UK inheritance tax (IHT), so providing the beneficiaries receiving any unused funds are not tax resident in Britain, they get to keep the money. IHT rules may apply in the country where they are tax resident of course.

Currency options

QROPS and other overseas pension schemes allow for the payment of pensions in currencies other than Sterling, providing a valuable safeguard for expats.

Freedom of choice with a QROPS

As an expat you can move your pension funds into a QROPS ‘in specie’, which means you can use the same funds, but under the QROPS umbrella for tax shelter. Alternatively, you could invest in almost whatever mutual funds, shares, ETFs, gold funds, silver funds or bond funds that you choose. 

Protect your investments

Depending on the jurisdiction chosen for the Overseas Pension Scheme, there is the potential for greater protection against creditors and other claimants than is typically available.

Accessing your funds

With a QROPS you will be able to access to your pension at 55 and also be able to receive an increased lump sum of 30% rather than the 25% if you have been offshore for 5 years.

If you desired, a QROPS also allows you to draw a higher pension income than in the UK.

A QROPS also enables you to get all your pensions transferred to the same place, where you can access them online whenever you want, giving you greater visibility.

Annuities

With a QROPS there is no need to buy an annuity at any time.

QROPS Qualifying Criteria

There are a number of criteria which you must satisfy to be eligible for a QROPS, including:

  • You have a UK pensions (excluding state pensions) of any value
  • You are planning to, or currently, live overseas
  • You are not planning to return to the UK or you will at least be out of the UK for a minimum of 5 years
  • You have not already purchased an annuity
  • If yours is a final salary scheme, then the scheme should not be already in drawdown
  • Investment allocation

UK pension funds often have a bias towards investment in UK assets. QROPS provide the scope for diversifying, as well as the option for more personalised investment management.

Request a free introduction to a pension specialist

If you are considering transferring pension funds into a QROPS, or have some questions about QROPS which you don't feel have been answered, request a free introduction to a trusted independent financial advisor through Experts for Expats.

As part of our introductory service, the advisor will arrange a free consultation which is designed to answer any questions and provide impartial assistance which will enable you to:

  • Identify whether a QROPS transfer is suitable for you
  • Clarify any costs, commissions or fees related to a QROPS transfer which you are unsure about
  • Avoid the potential pitfalls of a QROPS transfer
  • Get a second opinion about any advice you may have received - especially if you have been contacted out of the blue by an advisor extolling the benefits of QROPS
  • Have peace of mind about any decisions you make

At no time will you be pressured into making any decision, neither will you be under any obligation to proceed with any advice.

Testimonials from people who have used this pension advisor introduction service

We needed guidance in transferring our UK pensions into a SIPP. Very difficult to find unbiased information from google searches and it was gratifying to be referred to an expert via Experts for Expats. Very useful and clear help both on the website and from the consultation we had.

Mike H. United States, Pensions

In my particular case the referral was very speedy., the advisor was very confident, had relevant qualifications and knowledgeable about the legislatives framework and the in relevant jurisdiction and products was clearly up to date with a good fit

Neil B. Australia, Pensions

The expert provided was highly professional, gave useful information and advice and provided me with a recommendation of a firm to deal with the nitty-gritty.

Matt K. Portugal, Pensions

Experts for Expats has been featured in...

The Guardian - The older expats facing poverty – thanks to Brexit and frozen pensions - click to see article
The Times - Thousands of retiring Britons vote for Brexodus - click to see article
MailOnline - A third of British expats would like to move back to the UK and 40% admit they are homesick... but they will stay abroad for a better quality of life - click to see article
The Telegraph - The surprising places British expats can earn the most - click to see article
The Guardian - Brexit: how the new rules will change your visits to the EU - click to see article
We Checked And, Yes, Harry And Meghan Will Have To Pay Tax - We Checked And, Yes, Harry And Meghan Will Have To Pay Tax - click to see article

What expats say about our experts

I was connected with a tax professional with expertise in the area I required quickly. The were very well informed and eased my concerns, providing a very high level of service

Erica S.

Statutory Residence Test introduction in United Kingdom

Our consultant was very professional but listened. He then made an effort to speak in clear language and make easily understood recommendations.

Peter J.

UK Tax Return introduction in Canada

This was a superb service. I had my tax query answered in a timely, efficient, professional manner and the tax expert now has a new client so win:win

Tracey M.

Statutory Residence Test introduction in Qatar

I appreciated the whole Introductory process. It was fast, efficient (lots of feedback) and professional. My query was answered by the recommended company within the 15 minute time frame. I have kept the accountant's name and contact details on record for future reference. This was a great way to locate a professional from a long way away. I am sure I will use the company again in the future.

Gail B.

UK Capital Gains Tax introduction in South Africa

I've been impressed by all aspects of my dealings to date. The clarity of the information given, the job knowledge of the consultant and the lack of pressure for me to sign up to anything have been what I am especially satisified with.

Timothy S.

Investment advice introduction in United Arab Emirates

What is so good about the advisor you pointed to is that he has extensive knowledge of both France and the UK, so he understands the financial set-up in both countries. I also liked him immediately when we met on Zoom for the first time. He grasped my situation and my priorities very quickly. If I have any reservation it is that he didn't always acknowledge and respond to my emails, but I do know that this is a crazy time for advisors with the Brexit deadline.

Alison D.

Assurance Vie introduction in United Kingdom

As an expat who has been living outside the UK for 30 years, it was reassuring to speak to a representative of your company who seemed to have his clients interest at heart, especially when the client has no expertise in finances and investment.

Phil. C.

Pensions introduction in France

Yes, I would definitely recommend Experts for Expats, I was very impressed with the consultation, what really stood out was the consultant’s in-depth knowledge, his friendliness and the clarity of the information he provided (he scored 10 out of 10, in my book).

Nicholas L.

UK Tax Return, Double Tax Treaties introduction in Switzerland