Making a decision about where to invest your pension fund is an important step to make.
If you have never invested overseas before, it can be challenging to step outside of your comfort zone.
If you have a UK pension fund and plan to move overseas, you should consider a QROPS.
Introduced in 2006, the Qualifying Recognised Overseas Pension Scheme is an innovation that allows UK pension scheme members to transfer their assets and funds out of the country, free from UK income tax.
But is it as simple as that? Here is a summary of the points for and against transferring your fund into a QROPS.
FOR: Freedom to invest Do you find it a little patronizing to have worked (and paid tax) or your life, and then be told what you can invest your pension fund in, and more gallingly, when you must spend it on an annuity? In the UK we are forced to do this at or before the age of 75, but some other jurisdictions are more enlightened and permit greater investment freedom.
Depending on your risk profile, you might also enjoy being able to have more of a say about your own portfolio.
Jurisdictions like Guernsey offer some flexible pension structures that might be an appropriate place for your QROPS to be located.
Escape the taxman The taxman wants at least 25% of your UK pension scheme, even though you are no longer living in the UK and making use of the public services that he funds.
However, if you transfer your fund to a QROPS, you can escape any charge to the Treasury.
It should be noted, however, that this move only escapes the UK taxman, as you will be subject to the tax regime of the country in which your QROPS is located, in addition to the country in which you receive your QROPS income (if different).
But with around one thousand QROPS schemes to choose from, you can shop around for a QROPS in a country with the friendliest taxman.
Avoid exchange rate fluctuations Even if you have saved enough for a relatively comfortable retirement, it can be frightening to watch your fund be worn away by fluctuations in foreign currencies.
With a QROPS, you can choose to hold (and receive benefits from) your pension fund in same currency as the country in which you reside.
This makes life simpler, as you fix the currency risk and know where you stand at all times.
Inheritance rules UK inheritance tax provisions do not treat savers well.
Or rather, they do not treat their beneficiaries well.
By transferring your UK fund overseas when you leave the UK you can provide that your beneficiaries will receive your pensions fund as a lump sum, free from inheritance tax in any jurisdiction.
This is completely legal, and straightforward to arrange with the help of a competent adviser.
AGAINST: The list of reasons against getting a QROPS will depend on your current circumstances, and your plans for the future.
A better offer from you defined benefits plan? If you have a final salary pension scheme, consider carefully whether a QROPS will be able to match or exceed the amount that you would receive from it, even taking the tax position into account.
Ask your pension provider for a statement if you require clarification on this point, then ask your QROPS adviser for guidance.
You may find that it is better to stick with your domestic pension plan.
Do you want to go home in the next 5 years? If you are just starting your retirement, perhaps you enjoy good health and relish the thought of spending the next few years in sunnier climes.
However, if you plan to return to the UK for health reasons, or to care for elderly relatives, you might face a tax penalty for returning within 5 years from the date of your QROPS transfer.
Fees and charges Fees for QROPS were originally high - when the scheme was first introduced providers felt able to charge between 3 and 5% of the value of the funds they dealt with.
Now, on the other hand, competition has driven down fees so that rates of £500 per annum are common.
If you choose a financial adviser who makes commission from the providers rather than charging individuals fees, there will be no extra cost to you.
Compare the QROPS fees with what you are paying for your current UK pension scheme.
If you have never invested overseas before, it can be challenging to step outside of your comfort zone.
If you have a UK pension fund and plan to move overseas, you should consider a QROPS.
Introduced in 2006, the Qualifying Recognised Overseas Pension Scheme is an innovation that allows UK pension scheme members to transfer their assets and funds out of the country, free from UK income tax.
But is it as simple as that? Here is a summary of the points for and against transferring your fund into a QROPS.
FOR: Freedom to invest Do you find it a little patronizing to have worked (and paid tax) or your life, and then be told what you can invest your pension fund in, and more gallingly, when you must spend it on an annuity? In the UK we are forced to do this at or before the age of 75, but some other jurisdictions are more enlightened and permit greater investment freedom.
Depending on your risk profile, you might also enjoy being able to have more of a say about your own portfolio.
Jurisdictions like Guernsey offer some flexible pension structures that might be an appropriate place for your QROPS to be located.
Escape the taxman The taxman wants at least 25% of your UK pension scheme, even though you are no longer living in the UK and making use of the public services that he funds.
However, if you transfer your fund to a QROPS, you can escape any charge to the Treasury.
It should be noted, however, that this move only escapes the UK taxman, as you will be subject to the tax regime of the country in which your QROPS is located, in addition to the country in which you receive your QROPS income (if different).
But with around one thousand QROPS schemes to choose from, you can shop around for a QROPS in a country with the friendliest taxman.
Avoid exchange rate fluctuations Even if you have saved enough for a relatively comfortable retirement, it can be frightening to watch your fund be worn away by fluctuations in foreign currencies.
With a QROPS, you can choose to hold (and receive benefits from) your pension fund in same currency as the country in which you reside.
This makes life simpler, as you fix the currency risk and know where you stand at all times.
Inheritance rules UK inheritance tax provisions do not treat savers well.
Or rather, they do not treat their beneficiaries well.
By transferring your UK fund overseas when you leave the UK you can provide that your beneficiaries will receive your pensions fund as a lump sum, free from inheritance tax in any jurisdiction.
This is completely legal, and straightforward to arrange with the help of a competent adviser.
AGAINST: The list of reasons against getting a QROPS will depend on your current circumstances, and your plans for the future.
A better offer from you defined benefits plan? If you have a final salary pension scheme, consider carefully whether a QROPS will be able to match or exceed the amount that you would receive from it, even taking the tax position into account.
Ask your pension provider for a statement if you require clarification on this point, then ask your QROPS adviser for guidance.
You may find that it is better to stick with your domestic pension plan.
Do you want to go home in the next 5 years? If you are just starting your retirement, perhaps you enjoy good health and relish the thought of spending the next few years in sunnier climes.
However, if you plan to return to the UK for health reasons, or to care for elderly relatives, you might face a tax penalty for returning within 5 years from the date of your QROPS transfer.
Fees and charges Fees for QROPS were originally high - when the scheme was first introduced providers felt able to charge between 3 and 5% of the value of the funds they dealt with.
Now, on the other hand, competition has driven down fees so that rates of £500 per annum are common.
If you choose a financial adviser who makes commission from the providers rather than charging individuals fees, there will be no extra cost to you.
Compare the QROPS fees with what you are paying for your current UK pension scheme.