ROPS PENSION SCHEMES
A ROPS is a recognised overseas pension scheme and may be relevant to you if you are resident in the EEA (defined as the EU plus Norway, Liechtenstein and Iceland) and intend to remain resident in the EEA for 5 full years after your pension transfer. It may also be relevant in other countries such as Australia and New Zealand.
A recognised overseas pension scheme is a pension plan that is recognized under UK HMRC rules to accept transfers from UK pension schemes.
The pension benefits you have built up are your assets for your future financial security.
If you move abroad, or are thinking of moving abroad, you have the option to transfer them to another pension scheme, which could be based abroad
Who Can Hold A ROPS (recognised overseas pension scheme)?
Anyone with a UK personal and/or occupational pension scheme with at least £100,000+ invested and who has either left or, is planning to leave the UK in the next 12 months and living in the EEA and will continue to do so for the next 5 years.
If you fall into the above category you can maximise the growth and income potential of your pension, rather than be limited to the restrictions of a UK pension scheme and the lifetime allowance.
Note that UK state pension benefits cannot be transferred.
What are the Top Five Benefits of A ROPS?
For expatriates, this special pension scheme has several advantages over a regular UK pension plan:
- Avoid UK tax on your pension income – The UK government may charge as much as 45 per cent tax on your pension funds, your ROPS will be paid free of UK tax, with tax paid in your country of residence.
- Exempt your family from tax after your death – According to current UK pension rules, your beneficiaries will need to pay income tax on their inherited pension if you die over the age of 75, 100% of the ROPS is transferred in the case of death regardless of age.
- Benefit from unlimited lifetime allowance – Your lifetime allowance defines the maximum amount of benefit that you can draw from your pension fund. Currently, in the UK, the lifetime allowance is GBP 1.055 Million (compared to £1.8 Million in 2010). Once your UK pension has been transferred into a ROPS, a crystallisation event occurs and the ROPS remains outside of the lifetime allowance.
- Withdraw a higher lump sum – A ROPS allows owners to take a 30 per cent lump sum from their pension fund. In the UK, the tax-free lump sum cap is only 25 per cent.
- Hold and invest your pension fund in any currency – Instead of being restricted to GBP in the UK, a ROPS allows you to hold and invest your funds in any currency – for example, the local currency in your country of residence.
If you think a ROPS might be for you, get in touch with our team for a free, confidential consultation.