QROPS Transfer back to the UK – What is the process?

Retirement is the part of life that you work towards, therefore it should be an easy transition and not something that takes too much brain power. If you have a QROPS that you need to transfer back to the UK, then don’t panic – it’s not something that needs to be confusing or have you worried about how it’ll work. Once you know the ins and outs, it’s relatively simple.

• First things first, what is a QROPS?

A qualifying recognised overseas pension scheme (QROPS) is a system that many British people pay their pension into after deciding that when they retire, they want to live abroad. The scheme is often based in the country that they are planning to move to, but sometimes it can be based in a QROPS jurisdiction elsewhere.

However, expat life, career and retirement choices often change and not everything goes to plan. This means that if the expat who transferred into the QROPS changes their mind about their retirement plan and wants to be in the UK or has returned, then you need to understand how you can access your QROPS from the UK.

• Is it possible to transfer QROPS back to the UK?

Of course – a QROPS transfer back the UK is completely possible, and you have two options to do get your overseas pension back to where you are in the UK.

1. You can actually keep the QROPS

If you have returned to the UK you don’t have to make a formal transfer of your QROPS back to the UK, but the relevant tax would be applied based on the country/QROPS jurisdiction that your assets are held.

If you start to drawdown/encash the offshore based QROPS whilst you are in the UK, then tax would be due and you have to go by what your territory dictates, depending on where you live.

UK tax can also be charged on payments that you make via an overseas pension scheme with pension savings that benefited from a UK tax relief. If your contributions benefited from a tax relief on the way in and they were paid into an overseas pension scheme, or your QROPS received a transfer from a UK scheme, then you have to pay tax on a set criterion.

Basically – if it’s offshore and you choose to stay in the UK, the tax is payable because YOU are here, not the money.

Here’s what you need to know – what payments will be liable for taxation in the UK:

• Unauthorised payments
• Small lump sum payments
• Serious ill health lump sums that are paid to members aged 75+
• Short service refunds
• Winding up lump sum payments
• Certain lump sums paid following the death of a member

However, you don’t always have to pay the tax, unless you fall under the following brackets:

• You are currently a UK resident
• You have been a UK resident during the tax year of the payment
• You have been a UK resident during the previous five tax years
• The payment is made on an investment in taxable property

Both annual and lifetime allowance will be applicable if tax relief was given on contributions to an overseas pension scheme (QROPS).

It’s worth noting…

If you are a QROPS holder and don’t want to formally transfer your overseas pension back to the UK, then you would have to bear in mind that the following would apply:

• Restricted access within a QROP than that of a UK based pension
• Death tax at a rate of 55% would be due on the funds held in a QROP if you were to die as a UK resident
• If you are a member of a Gibraltar based QROPS you would not have full flexi-acces drawdown available compared with a UK SIPP

2. Transfer QROPS to a UK Scheme

The best solution is to repatriate your QROPS into a UK ‘Self-Invested Personal Pension’ (SIPP).

A SIPP in essence is the UK equivalent of a QROPS, and can be used by expats moving or returning to the UK who originally held an offshore pension scheme (QROPS) to move their pension back to a scheme based and regulated in the UK, rather than have to follow the law of the land offshore, too.

There are many positives as to why holding a SIPP is a better idea than a QROPS for a returning Expat:

• You won’t have to adhere to any future legislation or changes in the QROPS scheme. Your pension is held in a scheme based in the UK, where you are residing, making it easier to manage and withdraw cash in the future
• Your QROPS may of been delisted by the HMRC recognised QROPS list 
• At HB we offer a free QROPS switcher service to enable you to avoid any SIPP setup costs when moving your QROPS back to a SIPP
• A SIPP has a cheaper annual running cost than a QROPS
• If you hold an investment within your QROPS, then you don’t have to necessarily sell it; you can change the pension of the trustees to a SIPP – all funds and investment will remain completely unchanged avoiding any unnecessary exit penalties
• There will be no 55% pension death tax payable on a SIPP. As of 29/09/2014, George Osborne abolished the 55% pension death tax on UK pensions, meaning that as you have a UK pension, tax won’t be payable. A QROPS isn’t a UK pension, so full tax would be payable upon death, as well as income tax on the growth of the QROPS.
• SIPPs policy holders benefit from unrestricted access to their pension (under full flexi-access drawdown) as and when required; any withdrawals that you make that exceed the tax free lump sum amount would be taxed at your marginal rate in the UK. Depending which your jurisdiction QROPS (e.g. Gibraltar) is based it may only allow restricted access (capped drawdown).

If you hold a QROPS and your confused what step to take next, to get in contact with Harrison Brook and a financial adviser will take you through the steps and options available to you.