Qualifying Recognised Overseas Pension Scheme (QROPs), has been a popular scheme in which U.K expats, or those holding a U.K pension, can transfer out of the scheme into an overseas pension scheme. Today, I just want to look at the QROPs stats for 2021.
Since it was introduced in 2006, HMRC stated there have been over 130,000 transfers with £12 billion in value with an average transfer amount of £92,000. Although QROPs has been able to offer benefits, it is not without risks and could end up losing money with higher charges. Therefore understanding QROPs is essential.
Note that it may be referred to as ROPs. They mean the same thing!
HMRC dropped the term ‘qualifying’ from QROPs some years ago, but they are still called QROPs by many people.
Technically, all QROPs are in the Recognised Offshore Pension Scheme (ROPs) but a ROPs does not have to be in the QROPs subset.
Statistics of QROPS
These statistics are sourced from HMRC, as it keeps a figure of the value of transfers from the U.K to QROPs each year.
Figure 1: Is the HMRC chart on QROPs and the number of transfers, transfer value, the average value
* OTC stands for Overseas transfer charge
| Tax Year | Number of Transfers | Aggregate Transfer Value (m) | Average Transfer | OTC transfers | OTC paid (m) |
| 2006-2007 | 2,500 | £120 | £48,000 | – | – |
| 2007-2008 | 5,700 | £350 | £61,404 | – | – |
| 2008-2009 | 6,100 | £360 | £59,016 | – | – |
| 2009-2010 | 6,700 | £460 | £68,657 | – | – |
| 2010-2011 | 12,800 | £1,360 | £106,250 | – | – |
| 2011-2012 | 16,400 | £1,040 | £63,415 | – | – |
| 2012-2013 | 13,400 | £1,000 | £74,627 | – | – |
| 2013-2014 | 11,300 | £860 | £76,106 | – | – |
| 2014-2015 | 20,100 | £1,760 | £87,562 | – | – |
| 2015-2016 | 13,700 | £1,500 | £109,489 | – | – |
| 2016-2017 | 9,700 | £1,220 | £125,773 | – | – |
| 2017-2018 | 4,700 | £740 | £157,447 | – | – |
| 2018-2019 | 5,000 | £640 | £128,000 | 24 | £0.76 |
| 2019-2020 | 4,400 | £550 | £125,000 | 13 | £1.00 |
| Totals: | 132,500 | £11,960 | £92,196 | 37 | £1.76 |
QROPs List?
As explained earlier, QROPs, is a pension based outside the U.K, meeting specific set rules by HMRC that can accept transfers from a U.K pension fund to a QROPs. When adhered to these rules, the overseas provider informs HMRC and the taxman including the pension on the official HMRC list.
It must be on the official list if you are wanting to transfer into a QROPs and should be checked prior to making any transfer. As HMRC does not approve or check if the pension transfer is listed with QROPs latest list.
As moving money that is not on the Qrops list it comes with a 55% tax of the value of the funds transferred. Also, note that some schemes will not accept a transfer such as public service pensions.
How is a QROPs set up?
It is set up as a trust and the funds buy a portfolio bond which acts as a wrapper that contains investments. In terms of the scheme, it is worth checking what the specific rules are on withdrawals, annual contribution limits as they do differ slightly and I have written a blog about the different schemes in 2020 and that is illustrated in the table below
| QROPs Jurisdiction | U.K | Malta | Isle of Man |
| Flexi Access | Yes | Yes | No |
| Age Allowed to access | 55 | 55 | 55 |
| Maximum age to take Benefits | 75 | 70 | 75 |
| Pension Commencement Lump Sum | 25% | 25%/30% after10 years non-U.K resident | 25%/30% after 5 years non-U.K resident |
| Annual Retirement Income | Any | Any | 150% GAD rates higher after 5 years |
| Annual Contribution limit | 40,000 GBP | No limit | No limit |
| LTA limit | 1 million GBP | No Limit | No Limit |
| Income tax at source | Up to 45% | Up to 35% | 20% |
To draw down the 30% you need to be offshore for 5 years and currently a non-U.K resident.
Taxation on QROPs For The Individual Scheme
IoM QROPS: There is no personal allowance since 2010 in IoM for non-residents. QROPS income would be subject to a 20% tax rate on the full amount. However, this can be paid out tax-free at source for countries which have a Double Taxation Agreement with the Isle of Man, currently, that is Australia, Bahrain, Belgium, Estonia, Ireland, Malta, Norway, Poland, Qatar, Slovenia, UK.
There is a 7.5% tax upon death for an IOM QROPS whilst in drawdown.
NZ QROPS: There are no taxes on an NZ QROPS in New Zealand.
Malta QROPS: there is no tax on growth or death; income taxes are between 15% and 35%; but, if you are in one of the 70 countries which have a Double Taxation Agreement with Malta, the tax could be reduced to zero at source in Malta, although you would have to pay income tax in the country you live in at retirement.
Gibraltar QROPS: there is a flat rate of tax of 2.5% on a Gibraltar QROPS.
If you move your pension out of the UK tax net into a QROPS, you no longer need to pay UK taxes or worry about future tax changes in the UK. Only if you return to live in the UK, would your QROPS be taxed in the UK.
If I Die, What Are The Tax Benefits?
The table below shows the tax benefits with the different QROPs schemes
The table will illustrate what the tax implementation are when upon death on different locations and ages.
| Time When died | UK | Isle of Man | Gibraltar |
| Before Retirement | 100% of the Fund | 100% of the Fund | 100% of Fund |
| Retirement before 75 | Fund- 55% Tax | Fund- 7.5% tax | 100% of Fund |
| Retirement After 75 | Fund- 55% Tax | Fund-7.5% tax | 100% of Fund |
The UK pension rules as of April 6th, 2014, meaning that upon death, there is a 45% tax charge if your spouse decides to take a lump sum.
https://www.gov.uk/guidance/check-the-recognised-overseas-pension-schemes-notification-list
What Can You Withdraw From Your Pension If You QROPs It?
| Gibraltar | IOM | Malta | U.K. | |
| Before 75 | 0-150% U.K GAD rates | 0-150% U.K GAD rates | 0-150% U.K GAD rates | 0-150% U.K GAD rates |
| After 75 | 35-120% GAD | 35-120% GAD | Flexi drawdown | 35-90% GAD |
GAD is the Government Actuarial Department. They work out the pension you are allowed to withdraw based on 15 year UK FTSE Gilts. A typical drawdown might be around 4% – 6% per year of your pension pot which would increase as you get older.
Overseas Transfer Charge
QROPs now is divided in to two parts Europe and the rest of the world.
How the overseas transfer charge works?
The overseas charge applies when a U.K pension or QROPs gets transferred outside the EEA to QROPs that is not set up in the same country as where presently residing.
In other locations (see the full list below), it is also possible to transfer for example Australia and New Zealand.
QROPS rules allow expats to avoid the overseas transfer charge if they live in any EEA country while keeping their pensions in any other EEA country or living in Australia to an Australian scheme.
If this is not done it comes with a 25% penalty.
QROPs and Lifetime Allowance
The present lifetime allowance is £1,073,100 anything over this incurs a 25% tax.
When transferring to a QROPs if the fund is more than the present LTA when transferred 25% tax is applied
If it is less than the current LTA when it is transferred and grows over it is not subject to the 25% LTA limit.
Tax and QROPs
The fund grows tax-free when in a QROPs like it would in a normal pension. Additionally, though income tax is not deducted from the benefits and the income tax depends on where you live.
Investing in a QROPs
QROPs offer a similar range to what you would get in a U.K pension but it does have the advantage of offering international major currency options and funds that might be advantageous if you are living in the EEA or Australia.
This would need to be discussed with you IFA.
Drawdown and QROPs
As illustrated in the table above you can get 30% at 55 in some locations but only if you meet certain requirements such as having lived outside the U.K for 5 years (see table above) rather than the 25% tax-free PCLS at age 55.
Also, you are withdrawing at the local tax rate. Withdrawing at your local tax rate could be less tax than you would be taxed in the U.K.
Please speak to an IFA for advice on this.
Pension Freedoms and QROPs
You also have the options as you would in the U.K pension when it comes to withdrawals and you can buy an annuity, take income regular or irragular, withdraw the funds or mix and match the options.
Again, please speak to an IFA about this. They will be able to help you decide what is best for you!
Who are QROPs for?
This depends and would advise you to speak to an IFA, but it is for people that are on the move permanently. It will need to be set up accordingly with the jurisdiction of where you reside.
Which Countries have QROPs?
QROPs host countries within the EEA are:
- Austria
- Belgium
- Bulgaria
- Denmark
- Finland
- Germany
- Ireland
- Latvia
- Liechtenstein
- Luxembourg
- Malta
- The Netherlands
- Norway
- Slovakia
- Sweden
Countries outside the EEA that have QROPs:
- Australia
- Barbados
- Canada
- Gibraltar
- Guernsey
- Hong Kong ( for China)
- India
- Isle of Man
- Jersey
- Kenya
- New Zealand
- South Africa
- Switzerland
QROPs and Regulation
Most schemes are regulated by the government’s financial authority for the country where they are set up.
There are some exceptions for QROPS based on the EEA, occupational pension schemes and regulated pension providers.
If you want more information I have written a number of blogs on Qrops and costs.
