Qualifying Recognised Overseas Pension Schemes (QROPS)

Any non-UK resident (or a UK resident who plans to leave the UK) is generally eligible to establish a QROPS, regardless of their nationality. Consideration must be given to the most appropriate jurisdiction in which to establish the QROPS, which will depend on the individual’s country of residence and future plans.

It is possible to transfer most types of UK-registered pension scheme to a QROPS. This includes both individual pension plans and employer-sponsored pension schemes. However, it is not generally possible to transfer a pension that has already been converted into an insurance company annuity or a defined benefit pension that is already in drawdown.

No, it is not possible to transfer a UK State Pension entitlement.

Yes, but only if the rules of the other pension scheme permit the transfer to the QROPS.

Yes, it is possible to consolidate multiple pensions within a QROPS.

The investment options available will be dependent on the operating jurisdiction of the QROPS. However, QROPS generally allow investments to be made across a broad range of assets including collective investment funds, government and corporate bonds, cash deposits, equities and commercial property. Prohibited investments include residential property, tangible moveable assets such as antiques and works of art, personal loans and wasting assets.

As the trustee / scheme administrator of your QROPS, Sovereign is responsible for investment governance arrangements of your scheme, including determining an appropriate investment strategy and ensuring that it adheres to the investment provisions of your scheme’s governing documents.

Your investment strategy, setting out how the assets are to be invested, is one of the most important drivers of your scheme’s ability to meet its fundamental objective of providing pension benefits as they fall due over the life of the scheme. You need to take an appropriate amount of investment risk to seek the return needed, to understand the overall level of investment risk in your scheme and to manage that risk effectively.

Each member must nominate an Investment Adviser and/or Investment Manager who can make investment recommendations to the Trustee. The Trustee will take account of the investment objective and purpose of the scheme and ensure compliance with any applicable investment restrictions as imposed by the relevant governing law and the risk profile of the member.

As trustee / scheme administrator, our investment proposition is to provide our clients with investment options from our researched list of Investment Providers, which we monitor on an ongoing basis to ensure they remain appropriate for our clients. We will also monitor the costs involved with the management of your scheme assets to ensure that they continue to represent good value.

The earliest age at which QROPS benefits may be accessed is 55.

A QROPS will generally offer a pension commencement lump sum (PCLS) of up to 25% or 30% of the value of the pension fund (depending on the jurisdiction in which the QROPS is operating). The balance of the pension fund is usually applied to provide a drawdown pension. There is never any requirement to convert the pension to an insurance company annuity and the fund may remain invested throughout retirement.

This will depend on the jurisdiction in which the QROPS is operating and the pension scheme member’s country of residence when pension benefits are received. Any PCLS will not be taxed at source but could be subject to tax in the recipient’s country of residence.

Sovereign offers QROPS from Gibraltar, Malta and the Isle of Man. When a QROPS has been established, it is still possible to transfer seamlessly and without charge within the Sovereign QROPS range.

A number of countries that have ‘civil law’ legal systems do not recognise trusts and may therefore treat a trust-based pension scheme simply as an investment platform for tax purposes. If a pension scheme member is resident in a country with a civil law legal system, then a contract-based pension scheme can offer a solution.

A trust-based pension scheme is established under a trust deed and a trustee company (Sovereign) is appointed to ensure compliance with the trust deed and rules. The pension is therefore governed by the trust deed and rules.

A contract-based pension scheme is set up via an individual contract between the member and the pension scheme provider. The scheme provider (Sovereign) is the scheme administrator and there are no trustees.

Yes, we recommend that any individual contemplating a pension transfer should take specialist advice prior to commencing the process.

What will the tax implications be?

This should be discussed with your financial adviser. There are a number of potential tax charges to consider, including the UK Overseas Transfer Charge introduced in 2017.