Coping With The Cost Of Living With A QROPS

How the cost of living and currency exchange rates affect spending power is a factor often overlooked by expats moving to a new live abroad.

The problem is more worrying for pensioners on a fixed income who are hostage to financial and economic pressures beyond their control.

The good news for many pensioners in France, Spain and other Eurozone countries is their UK pension gives them greater spending power as the value of the euro declines.

A few months ago, the euro was worth 80p or more – now the value has dropped to 75p.

But although the gain may offer a pleasant few extra euros to spend, pegging pensions to a local currency generally pays better in the long run.

That’s because as local prices rise and fall, pensioners do not have to worry about when to exchange their cash to get the best currency rates.

QROPS transfers

This is where a Qualifying Recognised Overseas Pension Scheme (QROPS) can help.

A QROPS will not cover the state pension, but until April, any UK pension can be transferred in.

From April, any direct benefit schemes, such as public sector or civil service pensions, will be barred from transfers.

Direct contribution schemes, such as personal pensions or self-invested pension plans (SiPPs) remain unaffected by the rules which coincide with the governments flexible access upgrade to pensions.

A QROPS takes away the local exchange rate problems by giving a pension saver the option to have benefits paid in a number of major currencies – including Sterling, the US dollar and euro.

The problem for expats taking a pension in a local currency is switching the money back to pounds for visits home.

But that’s generally a minor problem and one suffered by tourists the world over moving between countries and currencies.

Flexible access

More than 3,600 QROPS are available in 45 financial jurisdictions worldwide.

Popular schemes for British expats or international workers who have moved permanently from the UK are based in Gibraltar, Malta and the Isle of Man.

Each has a slightly different approach to structuring a QROPS, but so far Gibraltar and Malta have both announced plans to allow flexible access.

These rules let pension holders aged 55 or over drawdown their funds as and when they wish.

As a market leading QROPS centre, the Isle of Man generally moves quickly with rule changes, so expats can expect a flexible access announcement from Douglas soon.