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The emergence of QROPS

With more and more Britons retiring abroad, there is an ever increasing demand for Qualifying Recognised Overseas Pension Schemes (QROPS)

Changes in demographics have the potential to create exciting opportunities. The increasing shift of Britons retiring abroad is no exception. This is evident from the Institute for Public Policy Research which states that 252,000 British pensioners were living abroad in 1981. In 2006, this figure had increased by more than 4 times to over a million. These figures indicate that more Britons are actively seeking to retire abroad. Furthermore, according to the Foreign and Commonwealth Office, 38% of over 55s are planning to relocate in the next few years.

Another associated change is the development of overseas pension schemes, in particular the Qualifying Recognised Overseas Pension Scheme (QROPS). With more and more Britons retiring abroad, there is an ever increasing demand for these types of schemes.

One of the main misconceptions about QROPS is their perceived expense. Whilst some providers are still costly with initial fees as much as £5,000, some QROPS have initial charges which are as little as £350.

Changes to regulation and increasing competition have meant that QROPS providers are now developing more innovative products with important cost advantages. Guernsey has been a popular jurisdiction and the Isle of Man has recently made changes to legislation which may well see it challenging Guernsey’s supremacy. This can only be a good thing because, again, it can lead to more competition and consequently, more product innovation and lower trustee charges.

Currently QROPS providers can offer various benefits to clients who have left the UK for five consecutive tax years and have no plans to return to the UK. These include:

Possibility of higher levels of tax-free cash

Potential to receive a higher level of income than available under a UK pension

Clients can choose to have their pension paid in the major currency of their choice

Ability to receive the pension gross and free of UK taxes

No UK tax charges to pay on death benefits where the client has been non-UK resident for more than 5 tax years

The above benefits, combined with increasingly competitive pricing structures, can only be welcomed by advisers and their clients who have permanently moved overseas or are considering doing so in the future.

Our sales team is available to present to advisers on a number of topics, including QROPS. Watch out for details of events throughout 2011.