America QROPS overview – what you need to know

For many individuals leaving the UK, QROPS – or Qualifying Recognised Overseas Pension Schemes – are tax-efficient funds which can accept a UK pension and dramatically increase income and investment flexibility.

However for USA residents or citizens, finding the right scheme for your needs can be particularly complex – something compounded by the reticence expressed by many independent financial advisors (IFAs).

QROPS for Americans

Many IFAs are unwilling to advise on QROPS for American residents; often claiming they are “no good” and that the pension is best left in the UK.

This is in spite of the Financial Conduct Authority publically reprimanding IFAs for not outlining the benefits of QROPS when they are the best option.

For pension transfers into America, this cagey nature is due to the US authority’s strict regulations and stringent reporting requirements.

Although many 401k pensions (America’s defined-contribution pension schemes), have been granted pension status by HM Revenue and Customs, the IRS has deemed UK pensions transfers unsuited due to the differing tax and benefit structures.

As a result of this, US residents must report their pension funds to the IRS and may possibly have to pay tax on any fund growth and income from the fund.

Problems and solutions

However, by selecting a jurisdiction with a double taxation agreement with the USA fully recognised by the USA, a QROPS solution can be found.

Yet you should also bare in mind you will need to have earned enough foreign tax credits to offset the transfer.

This makes sure your pension transfer will not be a ‘taxable event’ – and consequently ensures you do not have to face any associated taxes.

The benefits of a QROPS transfer are numerous – here are just a few:

  • No UK income tax liability.
  • No tax on fund growth or benefits paid in Malta as tax is paid in America.
  • 30% of your fund as a lump sum when you begin your retirement.
  • Far greater investment choice to grow and strengthen your fund.
  • Income can be made in US dollars into US bank accounts (this avoids the need to time income to make the best of currency fluctuations).
  • Ability to leave the remainder of your fund to your loved ones upon death.

Choosing the right advisor

Yet for every benefit, there is a common mistake that could be made; which can result in heavy tax fines.

This makes it all the more important to choose an international financial advisory regulated in the USA for your transfer, so they can guide you through the pension transfer process and highlight the optimum solution and any reporting requirements you need to adhere to.

Only an independent, US-regulated firm with international experience like will have the understanding to choose the right option for you, no matter the size of your fund or your nationality.

To be put in contact with the appropriate advisor, please Contact Us.