Although it is a good idea to plan for the future, no one can ever be one hundred per cent certain that everything in life will go according to plan. So, if you decide to make a pension transfer out of the UK and into a QROPS, you still have the option to transfer back to the UK in the future.
If you change your mind about your retirement plan and decide that you would rather retire in the UK, or move to the UK even after retiring in another country, then this should not be an issue.
The key is to take specialist advice from a firm that has expertise in QROPS transfers, so that you don’t end up paying additional, unnecessary tax.
Put simply, a QROPS is an alternative pension scheme based in a country outside the UK which HMRC has approved as eligible to receive transfers from UK pension funds.
Making a UK pension transfer from a QROPS back into the UK is possible, although there are tax implications and therefore it is best to take advice from a QROPS specialist who can explain all the options available to you.
If you are planning to spend time in the UK visiting friends and family, but not intending to resettle in the UK, then there is no problem keeping your QROPS.
The important point is to be aware of UK rules so that you avoid becoming resident in the UK for tax purposes. By doing so, you would lose out on the benefits of having made a pension transfer to a QROPS. Be aware that the rules on the amount of time you spend in the UK are quite strict, so you will need to take this into account if you are planning multiple trips back home.
Keeping your QROPS
One option is simply to keep your QROPS, even if you relocate to the UK. You don’t have to make the transfer back, although it may be advantageous in terms of costs and charges, as well as tax, to move your pension back to the UK if you are planning to live there indefinitely.
If you return to the UK and become resident in the UK for tax purposes, then the QROPS will become subject to UK pension regulations.
You may have to pay additional tax if you have pension funds offshore but are based in the UK. The rules differ depending on the country in which you hold your QROPS, your personal circumstances and the prevailing tax rules in the UK. It depends on whether you are classed as a UK resident and for how long.
This is why it is important to take advice from a QROPS specialist who can take you through the issues you need to consider.
Moving from a QROPS back to a UK pension scheme
It may be that, after taking advice, you decide that the best option for you would be to make a formal transfer from a QROPS to a UK scheme.
One of the more common destinations for funds relocated in this way is a Self Invested Personal Pension, known as an SIPP.
It is unlikely that you will be able to transfer back to your former employer’s scheme, particularly if it was a defined benefit scheme as when you leave your employer and once you make the transfer from these types of schemes, that decision is final.
However, SIPPs do offer a lot of flexibility that final salary and employer pensions do not. They provide greater control over the types of investments you can put your money into, and there is no obligation to buy an annuity, thanks to changes in the UK pension legislation.
Is a QROPS right for you?
QROPS can provide an opportunity for people to improve their benefits available from their pension funds.
If you have a UK pension, are planning to work, live and potentially retire overseas, and don’t plan to come back to the UK for at least five years, then a QROPS transfer might be a good option.
A QROPS transfer is only available if you have not already used your pension fund to buy an annuity. You can make the transfer out of certain final salary schemes, but there are additional checks required for this.
If, having made the decision to transfer out of the UK into a QROPS, you later decide to come back to the UK, the good news is that the decision is not completely irreversible. You still have options which allow you to take your retirement income in a safe and tax-efficient way.
For more information on making a pension transfer back to the UK, talk to a specialist adviser at bdhSterling.
