Overseas pensions and QROPS requirements

General implication when a QROPS no
longer meets the requirements

When a QROPS scheme no longer meets the requirements to be a QROPS, they
must disclose the value of UK tax relieved funds for UK relevant members on the date
they ceased to meet the requirements to be a QROPS along with the UK relevant
members' details to HMRC.

HMRC have confirmed there is no effect on the UK tax relieved pension funds that
have been transferred to the scheme providing the scheme was a QROPS at the time
of the transfer. The scheme continues to be a pension scheme under the laws in the
country or territory in which the scheme is established.

Contributions made to the scheme which are not UK tax relieved can also continue to
be made as non-UK tax-relieved funds are not impacted by the whether the scheme
is a QROPS or not under the QROPS regulations introduced by HMRC.
Further transfers from UK pensions will not be allowed due to such a transfer being
regarded as an unauthorised payment and would attract an unauthorised payment
charge of 55%.

The tax treatment of the pension benefits does not change and after five complete tax
years from your client leaving the UK, the benefit payments only need to meet the
local pension rules in respect of the Pension Commencement Lump Sum (PCLS)
and level of pension income; and they no longer need to be included in the client’s
UK tax self-assessment. A lump sum paid to your client’s family on their death would
also avoid a member payment charge of 55% after the five complete tax years.

Options for the scheme member

So what are the options available to a client who is a member of a scheme that no
longer meets the QROPS requirements?

  • Stay with the current provider
  • Transfer to a new QROPS provider

Staying with the current provider

The implications of this option depend on when the scheme ceased to meet the
QROPS requirements:

Pre 6 April 2012

In effect, the funds for these schemes are ring-fenced as “Pre 6 April 2012 QROPS”.

Any pension benefits (PCLS or pension income) taken from the overseas pension
scheme within 5 years of your client leaving the UK (or if they returned to the UK)
would not need to be reported to HMRC if the overseas pension scheme is no longer
a QROPS. The new 10-year reporting requirement will also not apply, if the overseas
pension scheme is no longer regarded as a QROPS as at 6 April 2012 when the new
reporting rules take effect.

Post 5 April 2012 but Pre 6 April 2013

Any pension benefits (PCLS or pension income) taken from the overseas pension
scheme within 10 tax years of your client leaving the UK (or if they returned to the UK)
would not need to be reported to HMRC if the overseas pension scheme is no longer

From 6 April 2013

All schemes that used to meet the QROPS requirements, but no longer do from 6
April 2013 will be defined as "Former QROPS".

All Former QROPS must report any pension benefits (PCLS or pension income)
made to UK resident members or members who have been non-UK resident for less
than 10 complete tax years to HMRC.

Transferring to a new QROPS

It is possible to transfer UK tax-relieved pension funds to a QROPS provider who
meets the current QROPS regulations.

This may mean that a client has a “Pre 6 April QROPS pension pot and a post 6 April
2012 QROPS pension pot. The client may choose to consolidate the QROPS pots by
transferring to one QROPS provider. This will however mean that the new 10-year
reporting requirements will apply immediately to the whole pension fund. In addition,
exit charges may apply for transferring from the existing overseas pension scheme.
Details of these charges should be available from the overseas pension provider.
The effect of these charges should be considered carefully before proceeding with a

In terms of the underlying investment it is possible to in effect transfer that investment
with you. In order to achieve this, the current provider must, as part of the transfer,
assign legal ownership of the underlying product to the new QROPS provider. The
current provider may choose not to assign the legal ownership of the underlying
investment or it may make a charge for executing the assignment. However, where
the underlying asset is, for example, an Old Mutual International bond, Old Mutual
International will make no charge for the change of ownership by way of assignment.
Old Mutual International would need to see evidence of the change of ownership and
receive confirmation of any new appointment in terms of investment

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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