QROPS pension power is within the reach of most expats

The number of British pensioners moving abroad is 25% up on 10 years ago and is steadily rising, according to the think tank  Institute of Public Policy Research.

With 388,000 Brits leaving the country last year, pensioners are a significant number of expat communities.

Once settled abroad, the next big decision is about pensions, investments and savings, as leaving the UK opens up a wide range of options, like a QROPS offshore pension that can make a huge difference to pension spending power and standards of living.

Taking a pension in to tax exile is not as expensive as everyone thinks. A QROPS is not right for everyone, but in general terms anyone with a pension fund of £100,000 should profit from a QROPS transfer.

With a smaller fund, some transfer might not be financially viable because the returns might struggle to match transfer costs.

How does a QROPS work?

A QROPS pension - or Qualifying Recognised Overseas Pension Scheme - is a trust-based investment wrapper available to anyone with UK pension rights. The intention is to let expats take their UK pension funds with them when they leave this country.

Advantages of a QROPS

QROPS pensions give much more flexibility to investing than a UK pension.

Restrictions on investing in UK based funds and markets in Sterling are lifted. Self managed or managed packages that let pension scheme members put their money in to commodities, funds or markets in most major currencies are the norm.

QROPS pension members have no obligation to buy an annuity or alternatively secured pension, which allows the pension holder to pass the fund on at death rather than lose the money to the annuity firm.

QROPS still pay a 25% tax free lump sum, although in some cases they may be more. Some Isle of Man providers allow a 30% draw down and some New Zealand schemes may allow more, depending on personal financial circumstances.

QROPS pension benefits also pack a spending punch because they are paid gross in the currency the pension holder chooses. This reduces the impact of exchange rate fluctuations and means the pension holder pays income tax, if any, according to the rules of the country where they live rather than the UK.

Disadvantages of a QROPS

Most of the disadvantages come from advisers or pension holders trying to manipulate QROPS rules to their favour.

Providing QROPS advice comes from a reputable, strictly regulated with a track record of completing QROPS transfer, like QROPS Adviser, switching to an offshore pension should not cause any problems.