Are QROPS still viable for Britons retiring overseas

Britain’s divorce from the UK is likely to render a QROPS transfer uneconomic for British expats as they may become liable for a transfer tax at a rate of 25 per cent.

For British expatriates, QROPS has long been a no-brainer as regards moving private pensions to tax-efficient offshore jurisdictions. The bad news for UK pension savers is just now being published on specialist financial websites, which believe a post-Brexit 25 per cent transfer tax on top of the costly set-up fees and other extras will be too hard a pill to swallow for the majority of UK expats. The extras include annual administration fees, fund management fees, advice fees and platform fees plus general miscellaneous costs.

Basically, once the remaining 75 per cent of the original value of the pension has been transferred, pension savers would need to factor in their liabilities for admin and other charges before their investment begins to grow its capital value. Given that the soaring markets seen recently may well be at the end of their upward cycle, lower returns in the medium term plus withdrawal of capital for regular living expenses could see capital being eroded at an unacceptable rate. One online site believes the above situation is exactly what HRMC intended in order to dissuade expats from taking pension transfers.

It seems one option for pensioners wishing to avoid this double whammy is to cash in their entire pension at the official retirement age thus attracting a nil tax rate. Unfortunately, for expats not used to dealing with investments, this can turn out to be risky, given the number of dodgy IFAs roaming the overseas British expat community in the hopes of making their fortunes. Rather than banking the pension pot, an offshore pension trust with many of the benefits of a QROPS is one answer. In this way, the money is held outside the pensioner’s estate, allows full flexibility as regards offshore investments and may attract tax benefits on drawn-down income.