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The Federation of European Independent Financial Advisers

When considering a move abroad, one important financial decision for prospective expatriates is how to handle their pension fund. Accumulated retirement savings hold significant value, and safeguarding one’s pension and ensuring a comfortable retirement overseas are crucial.

One potential solution is a Qualifying Recognised Overseas Pension Scheme (QROPS), now known as Recognised Overseas Pension Scheme (ROPS) since 2015. A QROPS transfer can be a viable option for individuals looking to transfer their British pension fund to another country. However, this is only possible in certain jurisdictions that have schemes listed in the HMRC QROPS list, which undergoes regular revisions.


A QROPS/ROPS refers to a pension scheme that meets HMRC rules, allowing British nationals to relocate and transfer their pensions abroad. However, inclusion on the list is subject to meeting specific terms associated with UK pensions, such as access restrictions before the age of 55. A QROPS that is on the list has simply told HMRC that they meet the rules – inclusion on the list does not mean that it has been ‘approved’.

QROPS options are available in various countries, including the EU-approved fund, The Pension Scheme of the European Union, as well as schemes in Australia, New Zealand, and Canada. However, many overseas locations, including the USA, do not have any options on HMRC’s list.

It is advisable to seek advice before opting for a QROPS transfer (especially if you are moving to a country that has no HMRC listed schemes), exploring alternatives, or are uncertain about the most financially secure option.

The Pros And Cons Of QROPS

There are pros and cons to QROPS transfers. A downside is that HMRC’s list is subject to change and regularly updated, and have excluded several countries popular among expats. For instance, countries like Cyprus, Portugal, France, and Spain do not have any schemes on the list. This issue is not limited to smaller or less globalised countries.

Opting for another EU or EEA-based scheme allows UK citizens to relocate and transfer their pensions without penalties. However, an Overseas Transfer Charge (OTC) of 25% may apply to some international pension transfers – see below.

Once pension funds have been successfully transferred, they are protected from exposure to UK taxes and future legislative changes. This is particularly beneficial, despite recent favourable reforms to the Lifetime Allowance (LTA).

The Main Benefits of QROPS Transfers

QROPS transfers offer many advantages such as flexibility, greater access to drawdown pension income, estate planning options, mitigating currency risk, and diversification opportunities.  Perhaps the most significant advantage – until the Spring of this year – was freedom from the Lifetime Allowance (LTA) – see below.

In order to be eligible for a QROPS, you must not have purchased an annuity or taken benefits from a final salary pension scheme. Benefits from Unfunded Public Sector Schemes (Police, Teachers, NHS) cannot be transferred to a QROPS or any other scheme.

The Five Year Rule

The “five year rule” refers to the duration of time a person has been non-UK resident for tax purposes. It is measured in tax years rather than calendar years.

The significance of the five-year rule lies in its impact on the availability of QROPS benefits. During the initial five years, retirement benefits must align with those offered in the UK. This includes a pension commencement lump sum, commonly known as tax-free cash, of a maximum of 25%, as well as tax at the beneficiary’s marginal rate, if the policy holder dies after the age of 75.

Once an individual has been a non-UK tax resident for five complete tax years, their pension, if transferred or already transferred to a QROPS, will follow the rules of the chosen jurisdiction. Individuals who have completed the five full tax years can access up to 30% of their pension as a lump sum, free from UK income tax and UK taxes on death after retirement. They can also enjoy various other benefits provided by ROPS.

As life expectancy increases, more people are spending a significant portion of their lives in retirement, sometimes a quarter or even a third. This makes retiring overseas an enticing prospect for many individuals, resembling a once-in-a-lifetime holiday.

Transferring your UK pension fund to a ROPS allows you to benefit from both worlds. You can enjoy tax relief while saving for retirement in the UK, and later pay reduced or no tax (depending on your country of residence and the jurisdiction of your chosen QROPS), while gaining greater flexibility when it’s time to access your retirement benefits overseas.

Accessing Your Pension

When it comes to accessing your pension, transferring to a ROPS doesn’t automatically exempt you from UK tax regulations. QROPS providers are required to report any unauthorised withdrawals from your pension to HMRC for a period of 10 years after the transfer is completed. An example of an unauthorised payment would be taking benefits from your ROPS before the age of 55.,  In this event, you would be subject to an unauthorised payment charge of up to 55%.

Since April 6, 2017, you must have been a non-UK resident for 10 consecutive tax years before you can access a QROPS pension (previously, the requirement was five consecutive tax years). However, even if you meet the 10-year rule, you may still be subject to UK tax rules if you withdraw from a ROPS within five years of switching from a UK-based pension.

The amount of tax you pay when receiving income from a QROPS depends on the tax regulations of your country of residence and whether that country has a double-taxation agreement (DTA) with the jurisdiction where the QROPS is based. A DTA typically allows you to avoid paying tax on your pension benefits in both countries.

If you are classified as a UK resident when accessing benefits from a QROPS, the income is generally subject to UK income tax. Again, it’s worth noting that should an unauthorised payment be made, you will be subject to a charge of up to 55%.

The France Issue

Initially, it was possible to acquire a French-based QROPS, but this option didn’t last long. SIPNR, the department of the French tax office responsible for handling assets for French non-residents, have previously stated that they do not consider a QROPS to be qualifying, and therefore, they do not recognize it as a pension.

Their position appears to be that the UK government should not have the authority to determine what the French government considers as qualifying. The French tax office felt entitled to disagree, which was not entirely unreasonable.

The core issue, as explained by SIPNR, is that a QROPS contradicts the rules of its French equivalent, the PER (Plan d’Epargne Retraite). SIPNR expressed willingness to review different QROPS contracts to explore potential solutions, but ultimately, all options were rejected, leading to the perception that QROPS were simply too problematic for French residents.

French nationals returning to France with a QROPS are strongly encouraged to transfer their funds into a PER to avoid any complications. From the French perspective, a QROPS is viewed as a trust rather than a pension. This characterization is unfavourable for French residents and has caused difficulties. To underscore the French tax office’s disdain for trusts, it should be noted that creating a trust as a French resident may attract a special tax levy of 60% based on the trust’s value, which is quite substantial.

Considering these factors, it is no surprise that obtaining a QROPS in France is not possible. While there may be claims that being within the EU makes it acceptable, the French tax office does not share this viewpoint.

What If You Already Have A QROPS?

If you are based in France and already have a QROPS, yet have never had any issues with the French tax office, you are probably wondering why.

It is most likely that you simply declared the QROPS withdrawals as income from a pension and your local tax office has no idea it is a QROPS, or has not caught up with what it is or what the central tax office thinks of them.

It could, potentially, go unnoticed indefinitely.

There are other issues, such as the fact that a transfer to a QROPS would be subject to an Overseas Transfer Charge of 25% if the QROPS is established in a non-EU country and you do not live in the same country.

It is not clear if this will eventually be extended to the EU, given Brexit. The tax treatment is not black and white because there is no specific law blocking the use of QROPS in France.

However, as you can see, there are considerable risks involved. It is important that you understand what they are before taking them.

Given the potential French issues with QROPS, they cannot be recommended for those looking to move to France or already residing in France. Before transferring your private UK pension into QROPs it’s important to ensure the country you are based in does not have similar issues to those experienced in France – Spain, for example, is similarly problematic.

The Lifetime Allowance

Prior to the Spring Budget, there was no limit on the size of pension fund you could accumulate.  However, there was a cap of £1.073m which is often referred to as the ‘tax-privileged amount’.  Any excess over this amount is subject to 25% tax which is deducted by the scheme before the fund can be transferred into a QROPS.  If you decide to take the excess as a lump sum, the tax is 55% which is not great news if you are a basic-rate taxpayer.

However, in a surprise move, the Government abolished the tax in this year’s Budget whilst retaining the LTA itself, stating that the LTA will be abolished next April.

As things stand, this is a distinct improvement for members with large transfer values because, at the moment, they can transfer into a QROPS without triggering any tax charge. However, the Labour Party has said that if it is elected it will reintroduce the LTA so there may be a limited window of opportunity to transfer without any tax charge.

The Overseas Transfer Charge (OTC)

Any transfers to a QROPS are also subject to an Overseas Tax Charge (OTC) of 25% of the value of the fund unless certain exemptions apply.

The two main exemptions are where:

  • The QROPS is established in an EEA country and the member is resident in another EEA country and
  • The member is resident in the same country as the one in which the QROPS is established.

Alternative Options

Alternatively, Self-Invested Personal Pensions (SIPPs) are a primary alternative to QROPS. SIPPs offer flexibility and a wider range of investment choices, both internationally and within the UK. Expatriates can benefit from tax relief on pension contributions as UK taxpayers or for the first five years as overseas residents, depending on their circumstances.

One vital difference between a QROPS and a SIPP is that the latter is a UK registered pension. This means that when you transfer your benefits into a SIPP, your benefits remain subject to UK pension legislation. This is not the case when you transfer to a QROPS.

Choosing between QROPS and SIPPs depends on various factors, including tax, LTA and OTC implications, access to benefits, and investment preferences. It is recommended to seek professional advice from experienced advisers to make well-informed decisions regarding pension transfers.

Get Bespoke Advice On Your Pension

Many schemes have been delisted by HMRC, without any legislative changes, due to being non-compliance with QROPS/ROPS rules. Before making a commitment to transfer your pension to an overseas scheme, it is essential to seek advice from a qualified pension advisor. They can provide comprehensive guidance on the rules and regulations of your intended retirement destination, as well as the QROPS jurisdictions that offer the best benefits for your situation.


This article was kindly provided by Blacktower Financial Management Group and originally posted at:

The above contents and comments are entirely the views and words of the author. FEIFA is not responsible for any action taken, or inaction, by anyone or any entity, because of reading this article. It is for guidance only and relevant professional advice should always be taken before investing in any assets or undertaking any financial planning.