Checking out if your preferred Qualifying Recognised Overseas Pension Scheme (QROPS) really is a pension that follows HM Revenue & Customs (HMRC) rules is a vital part of due diligence in moving a pension overseas.
Retirement savers have to ask some direct questions of the QROPS provider to make sure they are sticking to the rules.
Failing to do so could mean paying fines starting at 55% of the transfer value of any pension.
HMRC clearly states the tax authority is not prepared to approve any scheme on the official QROPS List as a genuine QROPS pension.
But the catch-22 is if the scheme is not on the list, a UK pension scheme cannot transfer any funds to the provider.
The reason for this ridiculous situation is HMRC does not vet schemes applying to go on the list. The scheme administrators self-certify that their pensions meet the rules.
The only exception is if the QROPS provider has ticked the ‘no publicity’ box on the certification form, in which case their scheme is left off the QROPS List.
In this case, you have to ask the scheme administrator in writing to confirm you can ask HMRC if the QROPS has self-certified.
Confused? Most people are by the QROPS List.
So what questions do you need to ask a scheme administrator to satisfy yourself they are running a genuine QROPS?
Testing your QROPS
This covers whether the scheme is open to residents of the country where it is based and that they receive the same tax benefits as an expat
A pension cannot make payments to anyone aged under 55 years old unless exceptional circumstances apply, for example, they are suffering a terminal illness
This is a whole host of other tests about where the scheme is located and how much of the fund is guaranteed to give a pension in retirement
Lastly, the scheme administrators have to give guarantees about reporting financial information about investors and their scheme to HMRC
The best way to choose a QROPS is to make a short-list of pensions that suit your personal financial objectives, and then check their credentials directly with the administrators.
Any administrator who is cagey or fails to responds should be crossed off the list.