QROPS stands for ‘Qualifying Recognised Overseas Pension Scheme’. In the same way that it is possible to transfer benefits between approved pension scheme providers in the UK, people already living, or intending to live permanently overseas, are also allowed to transfer their pension benefits — subject to certain conditions — to pension schemes outside of the UK. Providing the recipient of the scheme agrees to the arrangement, there’s no requirement to be resident in the country, prior to making the transfer.
(It is not possible to transfer a scheme overseas where i) an annuity has already been purchased and ii) the person making the transfer does not intend residing outside of the UK for less than five years.)
Before any UK scheme can be transferred to an overseas scheme, it must be approved and listed as such by Her Majesty’s Revenue & Customs (HMRC). The two main conditions for approval are that the pension scheme should be regulated in the country in which it is established and the benefits paid by the scheme must be subject to tax.
When a UK scheme provider receives an application to transfer benefits overseas, providing the overseas scheme is on the HMRC list, then the transfer can proceed: if the scheme is not listed by HMRC, the potential recipient can (if they wish) apply to HMRC for approval.
Any type of pension scheme can be transferred overseas including corporate, stakeholder, and personal pension schemes: Contracted Out schemes do however have to satisfy additional requirements before they can be transferred.
Pensioners living or moving overseas can have their basic state pension and/or additional state pension paid into a foreign bank account, or paid on their behalf to a named individual living in the UK. Note however that pensioners moving abroad on a permanent basis will only be entitled to the yearly increases if they reside in a European Economic Area (EEA) country. Irrespective of the location, in order to receive a state pension overseas, it is necessary to contact the UK Pensions Service by writing to International Pension Centre, Tyneview Park, Newcastle-upon-Tyne, NE98 1BA. Tel 0191 218 7777.
Apart from the convenience aspect, there are other advantages associated with QROPS such as the ability to take up to 30% of the fund in the form of a tax-free lump sum.