The Safety Of A Pension In A QROPS Fund

December 12, 2011 · Posted in Taxes · Comment 

If you happen to be an overseas employee in the United Kingdom and the money you earn has a Qualifying Recognized Overseas Pension Scheme, or QROPS, there is a way to protect that pension. If your company has put you on a work furlough in the UK and you expect to be returning home, you can keep your pension through transfer. The only requirement is that the way you choose to make the pension transfer is approved by Her Majesty’s Revenue and Customs, or the HMRC.

In order to qualify for a pension plan transfer, you have to be a non-resident of the United Kingdom for a period of five years. If you intend to leave the country a transfer can made anytime in the year before you leave. If your work furlough goes beyond the five year mark, your pension can no longer be protected by the HRMC. It will be taxed in the same manner as any other person holding a job there.

This pension plan has many pluses. You do not have to pay inheritance tax and you can will all of your pension to the beneficiary of your choice. Any future creditors will have no claim to these funds and you can take this money out in whatever form of currency that you wish. Twenty five percent of the funds is automatically tax free; you do not have to purchase an annuity; or face a high tax charge.

Other benefits apply but those are the major ones that most find attractive. There is no known pension transfer known for its great flexibility. If you are unsure of what you should do, speak with an advisor that is trained in pension transferring.

The stability and safety of your funds are above question. Most people use the Channel Islands as their place of jurisdiction for both those reasons. Investment establishments located there have proven themselves to be above reproach.

I am sure you are wondering if your funds are now considered to be tax free, but that is not necessarily the case. Any account activity that occurs within five years of your leaving the UK, is reported to the HRMC. Beyond that time the HRMC has no right to what you do with your funds. Yet with British tax worries removed, you could be liable to taxation based on where you live and where you have placed your funds.

With the HRMC being the watchdog and ruling faction of pension transfers, they have compiled a list of places that meet with their approval. Just because you now have the names of places you know quite well, does not qualify you to make the transaction on your own. It is in your best interest to use an advisor, as many places will not accept applications unless it is done by a professional.

Pacing your pension in a secure account does not come free. Even if you locate an advisor who will assist you for free, the establishments that operate the QROPS do charge fees. Some of them will set their fee according to the amount you have set aside. Others will have a set fee, regardless of the amount of money. This is a choice that only you can make.

You can learn everything you need to know about QROPS pensions and get excellent QROPS advice on our website, now.