Expats who want to free themselves from onshore pension providers and who want to take control of their retirement planning may find a Qualifying Recognised Overseas Pension Scheme (QROPS) is right for them.
A QROPS is a souped up pension plan that lets a saver make important decisions about their own pension fund such as where and how to invest.
QROPS work in a similar way to an onshore self-invested pension plan (SIPP).
UK pensions have drawbacks for expats. They tend to pay out in Sterling, which can mean issues over exchange rates. They can restrict investment choice to a range of funds run by their own managers.
However the power and flexibility of a QROPS comes with responsibility.
For investors who have the time and inclination to research the markets, understands diversifying funds and has the time to act as a fund manager, then QROPS is an ideal choice.
What is a QROPS?
QROPS are a pension wrapper. That means a QROPS is a set of underlying rules that run your pension, while the retirement saver or a fund manager look after the business end of growing the pension pot.
Some offshore pensions come in a QROPS Lite format, with fewer funds and a fully-managed option for less experienced investors with smaller pots who do not have the time to manage their own money.
The larger market is for transfers in of pensions worth £100,000 or more.
These larger funds have a full menu of investments, from property, shares, bonds and commodities spread across many world markets and currencies.
A bonus is both types of QROPS shield your money from the tax man and tinkering by the government.
Starting a QROPS
Starting a QROPS is not complicated.
Providers will want to see an investment recommendation from an international IFA, and as the market offers around 1,000 pensions in more than 40 financial centres, the help of an experienced and knowledgeable regulated advisor is a must.
Investors must live permanently outside of the UK and have one or more onshore pensions.
QROPS are available to British expats and investors from other countries that have pension savings in the UK.
Transferring cash from a UK pension to a QROPS is like switching pensions onshore.
You get a transfer value from the pension provider; go through a risk and assessment process with the international IFA who matches you with a short list of suitable offshore pensions.
Providing the offshore pension is on the HM Revenue & Customs (HMRC) QROPS List, the money is switched offshore and you are in charge of your money.