UK Fact-File Part 7:
Business Owner Welfare and Lifestyle

7.3 UK Offshore and International Pensions

Pension Portability

A major concern of any UK resident who is moving abroad may well be to move their pension scheme out of the UK's very rigid and unhelpful tax regime.

HMRC has a list of Qualifying Recognized Overseas Pension Schemes (QROPS), overseas pension schemes that meet the requirements stipulated by HMRC. These schemes are tightly regulated and there are a number of rules that apply. These schemes are particularly advantageous to individuals who are not intending to remain tax resident of the UK, though they could continue to work or carry out business in the UK.

For five years after transfer, the QROPS provider must report transfers and payments to HM Revenue and Customs, but after that period, the various tax benefits of the retirement scheme can be taken according to the rules of the country in which the scheme is based; generally with more favourable tax consequences than in the UK, as QROPs providers have tended to establish themselves in countries that tax pension benefits minimally.

Offshore pension schemes (QROPS) are operated by a number of providers in a number of countries, including Australia, Canada, France, Germany, Gibraltar, Guernsey, Ireland, Isle of Man, Jersey and Switzerland.

Other benefits of a QROPS include that there is no requirement to purchase an annuity and one can therefore invest the value of a pension fund wherever the best return can be obtained. There is no Inheritance Tax on QROPS and in some countries (as previously mentioned) there is no income tax on pension benefits. Also, the tax-free lump sum is higher than in the UK (30% as opposed to 25%). Pension payments with a QROPS are made in the local currency of the country where the scheme was taken out, thus avoiding issues to do with currency conversions.

As ever, expert advice should be sought before making any decisions about investment matters, particularly if you are planning to rely on the proceeds to fund your retirement.