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UK Pension Holders: Guide to QROPS

Jun 29, 2008
Having your money in a British pension can make it difficult to access, particularly if you are living overseas as an expatriate. The heavy taxes imposed by the HMRC and all of the rules and regulations that you have to go through to access your money make using your money difficult. To add to these problems, you will receive pension payments in pounds, which is likely not the currency you are using in your overseas home. As a result, you have to convert your money to your current currency, which can cause it to depreciate. The good news for expatriates is that the government has provided you with a way to combat this problem. You can move your money from your UK pension plan to a Qualified Recognised Overseas Pension Scheme, otherwise known as a QROPS. You are allowed to do this as long as you choose a qualified pension scheme and have been living out of the country for at least the past five tax years. By making this change, you can avoid all of the problems and hassle of withdrawing money from your pension plan while living overseas. If you are considering living overseas for an extended period of time, you need to seriously consider looking into the options for moving your retirement funds to a QROPS.

Owning a QROPS rather than a pension plan brings many benefits. First, when you withdraw money from a QROPS, you can often do so without paying the income taxes that the British government will take from your pension withdrawals. When it comes to tax savings, your beneficiaries will also benefit from your QROPS. When you die and they receive your money as their inheritance, it will likely be exempt form the common inheritance tax charged on pension funds. With a pension plan, you will have to purchase an annuity at some point. This requirement is waived when you put the funds in a QROPS. A QROPS works well as an asset protection plan as well. In many countries that have an approved QROPS, the funds you place in the pension scheme will be protected from your creditors. This allows you to protect more of your money for your children and your retirement needs, in spite of any financial problems you currently face. Some QROPS structures bring higher returns than pensions. When you invest your money in a UK pension, most of the investments will be tied to the UK. Since a QROPS is an overseas investment option, the investments will be more varied, providing you with the chance to make higher returns on your investments.

Perhaps you are wondering if there is a downside to putting your money into a QROPS. As with any investment option, investing with a QROPS is not a perfect choice. You will have to weigh the benefits against the potential risks before choosing to invest your money in this manner. Always talk to your financial advisor before making a decision like this. One potential downside is the cost associated with setting up a QROPS. You will need to hire a lawyer or financial advisor to help you set up the fund. This can get expensive, but it is necessary if you are going to set up the fund correctly and gain all of the tax advantages associated with owning a QROPS. Also, you will need to pay someone to manage your account, and the percentage that this costs will vary depending on the fund you choose and the amount you have invested in it. Keep in mind that each QROPS will perform differently. Some carry high risks but have a high potential yield. Others are less risky but will bring in less income. As with all investments, including your UK pension plan, you could lose money by investing in a QROPS. For this reason, you need to discuss the plan you are considering with your financial advisor. This will help you determine if it is a good fit for your investment profile and future financial needs.
About the Author
We are one of the most established firms in the offshore investing area. You can find more about us here LOM.com Feel free to contact us if you have any questions regarding offshore mutual funds, UK QROPS and offshore investing en general.
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