Why do QROPS exist?

The number of pensioners moving abroad and complex legislation required a simple solution.

Since the Second World War the life expectancy for those born in the UK has risen steadily, now standing at around 81, and as a result many people now spend over a quarter of their lives in retirement. As the amount of time the British expect to spend as pensioners has increased, so too has their awareness of the need to make adequate provision for their retirement, and apart from State pensions most people now set aside money in private investment or retirement funds to make sure that they can enjoy the years after they stop working.

grandpaAt the same time, more and more British nationals are opting to spend part or all of their retirement abroad, seeking warmer weather and different lifestyles. It has been estimated by the Institute of Public Policy Research that by 2050 one in five Britons of pensionable age will be living abroad permanently.

Spain is one of the most popular destinations for these retirees, and as a result there are numerous expat Britons in this country spending money saved in a UK pension plan.

Initially the UK’s tax system was slow to catch up with this demographic trend, and a host of complex regulations in the past meant that it was difficult to unravel the red tape and access a UK pension fund from abroad. In principle the aim of all these regulations was to protect UK tax revenue and prevent pensioners from spending too much too soon, and later relying on the government for income.

However, as the trickle of pensioners leaving for foreign climes turned into a steady stream and then a flood, it became clear that specific legislation was required to clarify and improve decades of individual pension laws. In addition, pressure was brought to bear by the European Union, who insisted that the UK system was in breach of the principle of freedom of movement, income and labour.

As a result, HMRC began a drive to simplify pension rules, and on 6th April 2006 QROPS was launched. This is a Qualifying Recognised Overseas Pensions Scheme approved by HMRC, and is essentially a pension scheme based outside the UK which is eligible to receive UK pension transfers. This enables pensioners to move and draw their pensions abroad without making large tax payments of up to 55%, and also provides them with increased investment freedom, a lump sum payment which can reach 30%, and the ability to pass on 100% of the fund to loved ones upon death. Listed QROPS schemes abide by UK pension rules to a large degree.

Prior to the introduction of QROPS a UK pension scheme had to be transferred to the pensioner’s country of residence, incurring an unauthorised payment and scheme sanction charge, but initially after 2006 most QROPS schemes were based in Guernsey. Many were moved to Malta following a conflict between local legislation and the regulations of HMRC, and new regulations introduced in 2012 have had the effect of adding the Isle of Man and Gibraltar to the preferred locations for establishing QROPS.

Further information about QROPS:

History of QROPS, why were QROPS created?

Benefits of taking out a QROPS for ex-pat residents

The most frequently asked questions in reference to QROPS

How long does it take to set up a QROPS

What are QROPS?

QROPS jurisdictions. Where can QROPS be based?

Talk to us about your QROPS needs

What Our Clients Say:

“Transferring my pension to QROPS was simple and straight forward. The staff at KFS were excellent and nothing was too much trouble”
Mr. S., Antequera Spain

As with all legislation of this nature, QROPS schemes are subject to change, and in order to take the best advantage possible of a QROPS scheme it is necessary to consult a specialized and regulated QROPS expert: each person has different conditions, savings and requirements, and what is the best solution for one is not necessarily applicable to another: individualized specialist advice is essential before making any decisions.

QROPS can be applied for by anyone with a UK pension fund, aged between 18 and 75, who is either living abroad or intending to do so within twelve months.