What is a QROPS?
In April 2006 QROPS (Qualifying Recognised Overseas Pension Schemes) were introduced to facilitate the transfer of pension funds overseas. A QROPS is a form of pension located outside of the United Kingdom, which is able to receive funds from a registered UK pension. A QROPS can be very attractive because of the potential tax benefits, namely the possibility of avoiding UK income tax and substituting it with a lower rate of tax (depending on the location of the QROPS). Whilst a QROPS can sound very attractive, in recent years a number of QROPS have been shut down for either failing to comply with the legislation and/or being used to exploit tax loopholes.
Whilst a QROPS can sound very attractive, in recent years a number of QROPS have been shut down for either failing to comply with the legislation and/or being used to exploit tax loopholes…
The dangers of transferring into QROPS that is later disqualified
The legislation surrounding QROPS is complex and even if a particular scheme is listed on HMRC’s ‘list of accepted schemes’ it does not provide any guarantees that the scheme is not in breach of legislation and therefore subject to disqualification at a later date. If you find yourself in breach of such legislation by making an “unauthorised transfer” (i.e. a transfer into a scheme that is in breach of legislation) the penalties and potential losses are significant: