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    Specialist Help For USA Residents

    It is estimate that there are over 1.5 million British expats now living in the USA. A very large proportion of this number will never return to the UK. Choosing to live out their twilight years in sunnier climes.



    The USA is certainly a favourite destination for many UK ex-pats, however transferring a pension into QROPS is problematic for stateside residents as well as ex-pats.

    For the first time some QROPS is now available that tackles the necessary legal and administrative issues that have prevented US residents and nationals from picking up the tax and investment benefits or transferring to a QROPS.

    QROPS advisers do confirm that the HM Revenue and Customs listings of QROPS have included several US 401(k) pension schemes more or less from day one of April 2006. In principle QROPS transfers were available to US nationals living abroad along with UK ex-pats moving to the United States.

    It does remain that the HMRC’s counterpart in the USA namely the Inland Revenue Service (IRS) has so far refused to recognise QROPS transfers into a QROPS USA 401(k) pension by UK ex-pats living there. The reason for this they claim is that the QROPS structure is not legal.

    A similar no-go status was imposed on US nationals overseas who transferred from a 401(k) to a QROPS.

    QROPS 401(k) And IRA Transfers

    Both triggered IRS tax penalties on any funds that were transferred.

    This unfortunately is likely to tighten up further from January 2013 when the Foreign Account Tax Compliant Act comes into force. The Act will virtually bar all US residents and US nationals living outside the country from transferring their pensions into a QROPS.

    Although this complicates any QROPS transfers in or out of a 401(k) pension some providers have managed to re-structure the master trust that manages a QROPS into a USA-friendly legal entity.

    This is a legal alternative that opens QROPS USA investments as a two-way street between transferring from a UK pension to a US QROPS and likewise from a US 401(k) to an offshore QROPS.

    The framework is now in place, however QROPS USA is still tied up in red tape and successful transfers do require patience, specialist skills and expertise.

    The possibility of moving QROPS pension transfers for UK ex-pats living in the US does open a new world of investment opportunities that were once unavailable.


What Is A QROPS?

A QROPS (Qualifying Recognised Overseas Pension Scheme) is an overseas pension scheme registered with and recognised by HMRC to allow transfers from UK Pension Schemes.

Who Can Take Out A QROPS?

Most people who live outside the UK who has a UK pension scheme can take out a QROPS.

Additionally, if you are planning to move from the UK within the next 12 months you may be able to take out a QROPS.

Can Any Pension Be Transferred Into A QROPS?

Most UK pension schemes can be transferred into a QROPS. The main exceptions being British Government and state pensions.

However, if you are in receipt of a pension from a Defined Benefit (often called final salary) or receive your UK pension income from annuity it is not possible to transfer the pension to a QROPS.

Can I Transfer Protected Rights To A QROPS?

QROPS can accept pension funds that have accumulated from contracting out of the State 2nd Pension (SSP) and the State Earnings Related Pension Schemes (SERPS).

Can I Transfer My Pension To A QROPS If I Move To The USA Or Canada?

In principle you can, but it is important to obtain specialist advice as there many potential pitfalls. We can arrange for an adviser to contact you when you give us your details.

Do I Have To Have A QROPS Based In The Country I Live In?

No. The QROPS can be based anywhere in the world. If you elect to have your pension income taxed in the country that the QROPS is based, it is important that there is a double taxation agreement in place between these countries.

What Tax Will I Pay When I Take My Pension From A QROPS?

You can usually pay tax where the rate is lowest, provided there are appropriate double taxation agreements in place. In some countries, the income tax on pension income is lower than the normal rate of income tax on earned income.

Are There Restrictions On The Amount Of Money I Receive From A QROPS?

Yes. A QROPS will only allow you to take the same amount of money out as a pension scheme that is set up in that jurisdiction. If you take more money than would be allowed under UK Law during the reporting periods (see below) there are significant UK tax liabilities.

Does A QROPS Have To Tell HMRC About Any Payments I Receive?

With a QROPS, part of the rules for approval is required to notify HMRC of any payments for the first 5 full tax years that you are resident abroad (QROPS taken out before 6 April 2012). So if you moved abroad in July 2008, and transferred your UK Pensions into a QROPS in 2010, it is required to notify HMRC of any payments made before 6 April 2014.

For QROPS taken out on or after 6 April 2012, the reporting requirements change to ten years from the date of transfer.

Can A QROPS Stop Being Recognised By HMRC?

Yes, it can. If a QROPS stops being recognised by HMRC, you can be liable to significant UK tax liabilities on any money you take out.

How Do I Take Out A QROPS?

The first thing to do is find a qualified financial adviser who has experience in the transfer of UK pensions to QROPS. They should also understand the tax rules in the country you live in. We can arrange for an adviser to contact you when you give us your details.

The information given in this article is strictly for information purposes only and is not to be construed as financial advice.

For more information on QROPS visit the HMRC website here.