Transfers into QROPS

Checklist for all transfers

You should consider all of the following points:

Existing pension Tick

Will the transfer amount exceed the UK Lifetime Allowance? (Potential tax charge as a Benefit Crystallisation Event) for excess over the LTA.


Does the current scheme include any guaranteed income which would be lost on transfer?


Is there higher pension commencement lump sum on commutation which would be lost?

Are there any exit charges on transferring out of scheme early?  
Would there be any loss of pension term assurance?  
Would there be any loss of spouse’s pension?  
Selection of the QROPS jurisdiction  

Does the QROPS jurisdiction’s local pension law fit with the client’s situation?

Are there any local tax rules to consider?  

Is there a Double Taxation Agreement between the QROPS jurisdiction and client’s country of residence?

Does the jurisdiction provide policyholder protection for QROPS members?  
Selection of QROPS provider  
Reputation - are they well known in the industry?  

Charges, are they competitive, transparent and reasonable for the initial and ongoing service provided?


Expertise, do they offer comprehensive in-depth technical support for advisers and clients?


Service/Accessibility – do their business hours, on-line support and languages spoken meet adviser and client needs?

Selection of underlying investment  

Charges – are they competitive, transparent and reasonable for initial and ongoing service provided?


Currency – is an appropriate choice of currencies available to reduce exposure to currency fluctuations?


Diversity – is a sufficient choice of assets available to match the client’s investment risk profile?


Portability - any there any restrictions based upon where the client or QROPS provider reside?


Accessibility – does the flexibility of the investment complement the QROPS withdrawal options?



Considerations for transfers from final salary (or defined benefit) schemes


  Final Salary Scheme 


Benefit type

A final salary scheme is also know as a defined benefit scheme because the member knows what they will receive (other than inflationary increases) when they start to take the benefits.

Most QROPS are money purchase or defined contribution’ schemes where the member knows how much they are investing, but not what they will receive as a pension depends upon the performance of the assets.
If the funds perform well, then the pension may be higher than that provided by the final salary scheme, conversely if the performance is poor, this may be lower.

Scheme benefit

A final salary scheme will be offered by an employer and held segregated from the employer’s other assets (usually by placing the funds in trust). This affords the member some protection against the employer becoming insolvent or unable to fund the pension payments.

Scheme members may also be entitled to compensation from the UK Pension Protection Fund, although this is not guaranteed.

Transferring to a QROPS breaks the link to the employer and any future issues they may have with funding. This includes no access to the UK Pension Protection Fund. Where the QROPS is set up using a trust arrangement then the funds are segregated from the assets of the QROPS provider and the funding will relate purely to the performance of the QROPS investments.


The Trustees decide with their advisers where to invest to provide the benefits for the member.

The member (or their investment adviser) chooses where to invest the funds in the QROPS provided these meet the Scheme rules for acceptable investments.

Loss of

Normally, the final salary scheme guarantees to provide an inflation linked pension income for the member’s lifetime regardless of how long they live.

This guarantee is not provided by the QROPS scheme and the transfer value includes a cash equivalent of this guarantee which is calculated based on average life expectancy.

Loss of life cover

The scheme may offer a lump sum for the client’s dependents if the member died before retirement.

If required, the client will have to secure replacement life cover, which will be based on the client’s age and health now.

lump sum

Under a final salary scheme there is not a simple percentage to calculate the pension commencement lump sum, however it is possible for a member to commute some of the pension income to lump sum.

A lump sum of 25% to 30% (depending on the jurisdiction) of the transfer sum if taken within 5 years of the individual becoming non-UK resident. This may increase if taken after 5 years of non residency, subject to the jurisdiction.
Please read the QROPS Q&A document for further details.

Loss of spousal

If the individual dies before or after retirement the final salary scheme may provide a pension for the spouse or civil partner.

The QROPS fund may be used to provide a spouses pension or benefits to other beneficiaries.

Retirement date

A member may retire early or late subject to agreement of the employer, the scheme trustees or both, and meeting the requirements of the tax rules.

Following transfer to a QROPS, early or late retirement is governed only by the pension scheme rules in the QROPS jurisdiction and HMRC requirements for QROPS.

Cost of
administering the

The administrative costs of providing a final salary scheme are covered by the employer. The member is not specifically charged.

Most QROPS providers charge fixed fees on setting up the QROPS and annually to cover the cost of providing the scheme.
Any costs of managing the QROPS are taken from the member’s funds.



The cash equivalent transfer value represents an actuarial calculation of the value of the members’ rights under the scheme. Where the scheme is in deficit the transfer value may be reduced so that it reflects the member’s fair proportion of the scheme funds.


There may be encashment charges on transfers out from a QROPS.

The information provided in this article is not intended to offer advice.

It is based on Old Mutual Wealth's interpretation of the relevant law and is correct at the date shown at the top of this article. While we believe this interpretation to be correct, we cannot guarantee it. Old Mutual Wealth cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.

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