As per one of the analysis, it’s estimated that around 4.7 million people who has already left or is in the process of leaving UK are moving their pensions out of UK to Qualifying Recognized Overseas Pension Schemes (QROPS). HM Revenue & Customs-recognized (HMRC) should give permissions in order to act as a pension schemes outside UK and HMRC allows the pension schemes which are regulated and recognized in the country where it is established for tax purposes. QROPS is one of them, approved by HMRC.
Nigel Green, the deVere Group founder and chief executive said that, “The 15 per cent growth in our QROPS business to the year ending
December 2013 reflects the sustained upward trend in the QROPS sector more generally”. He also said, “I would attribute this to the growing public awareness of the mounting problems of the UK pension system. There is a growing public perception that there are fewer incentives to keep retirement funds in the UK due to the scrapping of some key age-related benefits, among other factors; and because, as clients frequently tell us, pension pots have in recent years become easy targets for stealthy and not-so stealthy government raids.”
Green added: “The growing demand for QROPS is also attributable to the fact that an increasing number of expats are learning about their existence and discovering their benefits – which include being able to avoid the UK’s 55 per cent death taxes applicable on pensions, greater investment flexibility, and having pensions paid out in most major currencies.”
Though QROPS has many benefits, the transfers can be made to only few of the allowed pension schemes where transfer has to be tested against the lifetime allowance. One of them is transfer from a UK registered pension scheme to a QROPS is viewed as a “benefit crystallisation event”. Any amount moving out of UK registered pension schemes should be tested against the lifetime allowance (LTA) and amounts is subject to a tax charge of 25 percent if the transferred amount is above the lifetime allowance.
Not only Green, there are few others who also felt that there is increase in the percentage of people who are moving their pension pots out of UK year after year.
Justin Harris, managing director of Chase Belgrave, an independent financial advisory company. He says, in last couple of years, because of the economic downfall, most of the UK emigrants are considering in shifting their pension funds to an overseas arrangement mainly to QROPS which is more secure, flexible in terms of variety of investment plans that are available and also has good returns.
Mr Harris added: “The key tax and flexibility advantages of QROPS are also more widely understood among the general public. It really does seem that more and more expatriates will opt to move their frozen UK pension offshore.”