The Benefits Of Qrops: Is This The Right Choice For You?

By Author: vikram kumar
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Anyone with a pension scheme in the UK that is now living abroad or will be leaving the UK can now transfer that private pension into a QROPS, or Qualifying Overseas Recognised Pension Scheme. However, you'll want to do some careful financial planning, as this isn't always the best choice for everyone.

The UK pension system is very complicated and swallowed up in many different restrictions and regulations. Retirement planning can seem impossible and many people are opting for other investment options, such as real estate. However, if you have a pension in the UK, and you live abroad or you're planning on doing so in the near future, you may be able to transfer those funds into a QROPS. There are a number of benefits to QROPS. Consider the following:

First, QROPS allows someone to avoid paying an inheritance tax on the pension fund, which could be quite substantial. It all depends on where the QROPS will be located. Second, there is more freedom in what you would be able to invest in. You aren't limited to investing your pension in what the people who oversee the fund mandate. Third, you can take a lump sum payment, ...
... which is something you can't do with a standard pension. You can purchase an annuity if you like, but you're not required to. Fourth, you will have protection against any future bill collectors or creditors that might want to get their hands on your money.

The fifth major benefit allows you to leave all of your pension to your children or other beneficiary, which is another thing you can't do with a standard pension. While some may pay a small death benefit, the remainder of the pension is simply gone. With QROPS, your family will continue to be provided for after you are gone. This is often the deciding factor for many people when leaning towards QROPS.

Finally, the tax benefits are very substantial. You can access your funds in a more efficient way when it comes to taxes. While it may seem as though this should be a no brainer decision, it's not the right choice for everyone. Most of the benefits for QROPS are for those people who have been out of the UK for at least five years and they don't plan to return anytime in the near future. Another benefit is that don't have to report the payments or withdrawals to the HRMC since your pension will be subject to the laws where you currently live or plan to live soon.

The essential benefits come into play when one has been out of the UK for at least five years or does not intend to return in the near future. However, the type of pension scheme that you hold will have factor into whether QROPS is applicable. Most of the QROPS are unsecured pensions, which are subject to the regular market and all its volatility. These types of pensions don't provide the security of a pension with defined benefits.

In closing, it's best to speak with a financial advisor who is familiar with QROPS. This will help insure that you're making the best financial decision for your and your family.

Resource Box

QROPS offers the information you need on transferring your standard pension to a QROPS
fund. QROPS give you the chance to leave the money you rightfully earned to your beneficiaries, without the inheritance tax penalties so prevalent today.