Understanding QROPS: Finding the right pensions scheme for you

Since its introduction in 2006, the popularity of QROPS (Qualifying Recognised Overseas Pension Schemes), an HMRC ‘recognised overseas pension’ or ROP, as an alternative to a SIPP (self-invested personal pension) has continued to grow among expatriates. 

For an individual who has moved overseas and has acquired UK pension benefits, transferring their UK pension to a QROPS can offer flexibility, alongside other potential tax planning and currency advantages. That said, a QROPS is by no means a one-size-fits-all solution. It is important to first understand all the features they can afford along with any disadvantages or restrictions before you decide to move your UK pension to a QROPS.


A QROPS is an overseas pension scheme that meets certain requirements set by HMRC.  A QROPS must have a beneficial owner and trustees, and it can receive transfers of UK pension benefits.  A QROPS must also always meet the four following definitions:

  1. The scheme must be a pension scheme;
  2. The pension scheme must be an overseas pension scheme;
  3. The overseas pension scheme must be a recognised overseas pension scheme; and
  4. The recognised overseas pension scheme must become a QROPS as defined by the regulations. That is, the scheme will operate the overseas transfer charge and comply with the information requirements as prescribed by HMRC.


UK pensions are understandably structured around UK residents, so if you live overseas or are thinking of moving abroad then you should consider the benefits that a transfer to a QROPS may bring:

  1. You may want your pension to be in the country that you retire so you are not receiving income in Sterling and spending in a different currency – especially as exchange rates can fluctuate.
  2. You may also find it easier to keep track of tax and regulation changes if they happen in the country that you reside in.
  3. You may be working outside of the UK for an employer that offers a QROPS and you like the benefits offered.


  • Up to 30% tax free lump sum: with a QROPS, after the 10-year reporting period (five years before 6 April 2013) the UK payment rules no longer apply, and you will be able to take up to 30% as a tax-free lump sum.
  • Testing against the Lifetime Allowance (LTA): when a UK pension scheme is transferred to a QROPS, its value is tested against the LTA at that time. As the pension has been tested against the LTA, any future growth is then outside of the scope of the LTA.
  • Taxation of income: UK pensions are generally paid out net of basic rate tax. Pay As You Earn (PAYE) applies to all pensions from registered pension schemes. However, non-UK tax resident members can apply for payment to be paid out gross by completing the relevant HMRC form. With a QROPS, you can transfer to a jurisdiction which pays out gross income automatically and charges little or no Income Tax on your pension benefits, so you only pay the tax, if any, applicable in your country of residence.
  • Flexibility: A QROPS allows tax-efficient pension income planning with the ability to alter the level of income drawn in line with tax planning, or changing income needs throughout retirement. The scope of this flexibility will vary depending on the jurisdiction of the scheme, from full access (see pension freedoms below), to the ability to select a withdrawal amount from the permitted amount calculated by the scheme trustee, between 0 and 150% of GAD (Government Actuary Department) rates each year.
  • Death benefits: QROPS funds can be passed down to family members free of UK Inheritance Tax (IHT) on death at any age*. If a member dies whilst being a member of a QROPS (and after being non-resident for five complete tax years) then no UK scheme charges are reportable to HMRC. You should however also check there are no local death taxes.

*Post 75 it may not be considered a tax-free distribution in the beneficiary’s country of residence.

  • Currency options: while UK pensions will typically only pay out in sterling and require any payments to be made to a UK bank account, some QROPS allow you to invest your funds and make withdrawals in more than one currency. This is a major advantage for British expatriates living abroad as it reduces dependence on Sterling exchange rates and removes currency conversion costs.
  • Transfers: if you repatriate you don’t have to transfer your QROPS back into a UK registered pension scheme, but you can if you want to (HMRC treats this as a transfer, not a contribution to the UK registered pension scheme). It is also possible to transfer an existing QROPS to a different QROPS jurisdiction if that would be considered more appropriate.


Flexible access came into effect in the UK from 6th April 2015, allowing full flexibility for UK pension holders.  However, outside of the EU the UK Chancellor was not bound by any treaties and the right to full flexibility was not therefore extended to QROPS jurisdictions outside of the EU. QROPS jurisdictions stipulate that 70% of the scheme funds are used to provide an income.

QROPS firms located within the EU are allowed to offer flexible access to their scheme holders but at present Malta is the only EU jurisdiction that has proceeded to implement the rule changes and now allows flexible access.


From 9th March 2017, transfers to a QROPS attracted a 25% tax charge, but there are exceptions.

You will still be able to make a transfer tax free to a QROPS if:

  • You are resident in the country where the QROPS receiving your transfer is based.
  • Or you are resident in a country in the European Economic Area (EEA) and the QROPS you are transferring to is based in another EEA country.

If the scheme you are transferring out of does not receive the correct paperwork, then they are required to charge the 25% on transfer regardless and you will have to apply for a refund via your scheme at a later date. If you are exempt from the charge on the transfer but your circumstances change within five years (such as moving to another country or moving your QROPS to another country), then you may have to pay the 25% tax charge at that point.


When formalising your retirement, as an expatriate, the existence of a Double Taxation Agreements (DTA) is an integral part of the financial planning. At the point of taking benefits you will need to consider the terms of any DTA that exists between your country of residency and the jurisdiction in which your QROPS is established. Where you are resident at the point of retirement may now be different to where you resided when the original transfer took place. Therefore it is important to review the various QROPS jurisdictions and their prevailing DTAs prior to accessing benefits to ensure that you limit your liability to tax and maximise your pension savings.   


If you move abroad, you do not have to transfer your UK pension pot. You can choose to leave it in the UK and then draw benefits from the UK.

In all cases it is recommended that you should take regulated financial advice before transferring to a QROPS to ensure that you understand the features and options in the new plan, how it differs from your current pension and have fully considered any guarantees or other benefits that you might lose by doing so.

For help and advice on finding the right pensions scheme for you, please contact us

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