British expatriates who are currently benefiting from lower taxes through Qualifying Recognized Overseas Pension Scheme (QROPS) transfers may be interested to know that ‘Q-Day’ is coming on April 6th, 2012 and this may affect your tax position upon transfer. Many of the new rules involve reporting requirements, but one such provision, known as ‘condition 4’ may mean that some schemes will have to de-register as QROPS schemes. At time of writing, the Malta QROPS may be the best option due to the double taxation agreements it holds with 60 countries which gives your pension an added layer of protection. However, each case is different.
QROPS is a form of pension scheme that is based outside of the United Kingdom but is recognized by the British authorities. British citizens who are living outside of the UK can transfer their personal pensions to a QROPS and avoid the UK tax net. UK expats can then benefit in two main ways:
One of the biggest misconceptions about QROPS is that British citizens living abroad need to move their pension to the country in which they are currently living. This is not the case and expats can hold QROPS in the country of their choice, providing the scheme they select is valid and recognized. In fact, for tax and security reasons, this is recommended. Expats living in Oman, for instance, may be better off transferring their pensions to somewhere like Guernsey, a country that sits outside the UK tax net but offers a safer jurisdiction in which to hold your pension monies.
A QROPS can invest in almost any mutual fund available on the major stock exchanges round the world (e.g. FTSE in the UK or the S&P500 in the USA). If you decide to take more risk, by investing in emerging market funds for example (e.g. investing in blue chips in China), you may make higher or lower returns depending on the market. However, you can opt for low risk funds (e.g. bonds or gilts) or even move your pension into a high interest bank account within the QROPS if you want a more secure pension scheme.
Furthermore, QROPS are not suitable for everyone. The set-up costs associated with the scheme mean that pension funds of 30,000 GBP or less may mean it is not worth entering the scheme.
Also, pensioners who have plans that offer Guaranteed Minimum Pensions (GMP) would need to give up these rights in order to move into a QROPS.
It is extremely important that anyone who is considering taking up a QROPS consults a financial adviser who is a QROPS specialist, as this is a constantly expanding market with a number of different solutions available.
A number of changes to the legislation governing the use of QROPS will be implemented on the 6th April this year and some of the existing schemes will cease to qualify as QROPS. As such, expats are being urged to seek independent advice in order to avoid making decisions that could place their pension at risk.
Read the full article: http://www.qropsspecialists.com/qrops
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