What is QROPS?
If you have worked in the UK, you probably have accrued UK pensions. In 2006, the UK tax authority HMRC created the Qualifying Recognised Overseas Pension Scheme (QROPS) to allow individuals who have left or intend to leave the UK permanently to transfer their pensions out of the UK with them. Only a QROPS can receive pension transfer from the UK without incurring any UK tax charges.
A QROPS has to be broadly similar to a UK registered pension scheme where the earliest retirement and pension drawdown age is 55 years old and the pension fund has to provide lifetime income. Any scheme that pays the pension income before the retirement age cannot be a QROPS.
There are many QROPS in the world in many different jurisdictions. To be a QROPS, the scheme trustee only has to register with HMRC with all the necessary documents and declarations. Being on the HMRC QROPS list does not mean that the scheme is approved or endorsed; it is simply registered with HMRC.
Who is eligible?
Any individual (any nationality) holding a UK pension who has already left the UK or plans to leave the UK in the future.
What type of pension can be transferred?
Almost any UK registered pension can be transferred to a QROPS including personal pensions, employer sponsored pension schemes and even pensions that have been used to contract out of the State pension (Protected Rights).
If you have left the UK, moving your pensions out of the UK generally gives you tax efficiency and greater investment flexibility that result in better investment returns. The potential benefits of transferring your UK pension to a QROPS are:
QROPS vs Standard UK Pension Scheme
Standard UK Pension Scheme
|What is the maximum withdrawal as lump sum?||Up to 30% of fund value if more than 5 tax years out of the UK||Up to 25% of fund value|
|Earliest retirement age?||Generally 55, subject to jurisdiction||55|
|Is my pension income taxable in UK?||No. (Note that it may be taxed in your tax resident country and the QROPS jurisdiction.)||Yes, up to 50%|
|Are death benefits taxable in UK?||No||Taxable up to 55% if paid as lump sum|
|How is the pension income paid/determined?||Maximum 120% of UK GAD rates subject to jurisdiction||Based on 100% UK GAD rates|
|Is there any investment restriction?||Flexible with wide range of investment options||Limited|
|Can I consolidate my pensions into a single scheme?||Yes||No|
Gibraltar is selected as the ideal jurisdiction for QROPS because it has the right pension, tax and regulatory framework to setup and regulate a pension scheme that can be qualified as a QROPS. Not only that, tax efficiency vis-à-vis the other jurisdictions are taken into consideration along with the expertise and experience and the price competitiveness of the QROPS trustees available.
Gibraltar was one of the first EU countries to implement the Anti-Money Laundering Directive on an all crimes basis. A 2012 report by the Financial Action Task Force (“FATF”) highlighted Gibraltar as having “a robust arsenal of legislation, regulations and administrative practices to counter money laundering”.
Gibraltar has been classified as a co-operative tax jurisdiction by the Organisation for Economic Co-operation and Development (“OECD”) and has been ranked as “a well-developed supervisor” by the International Monetary Fund (“IMF”).
Gibraltar has only recently returned to the Qualifying Recognised Overseas Pension Scheme (“QROPS”) marketplace following amendments to local income tax legislation made in June 2012 following discussions between Her Majesty’s Revenue and Customs (“HMRC”), the government of Gibraltar and members of the Gibraltar Association of Pension Fund Administrators (GAPFA”).
GAPFA has recently introduced a Code of Practice which is a compulsory requirement for its members and designed to uphold the reputation of Gibraltar as a key financial centre.
In terms of tax efficiency, Gibraltar only has a low and flat tax of 2.5% on the pension income. There is no death or inheritance tax. If the pension income is received in Singapore, 2.5% is the only tax to be paid as there is no tax on overseas income and capital gains in Singapore.