If you’re a British expatriate returning to or having returned to the UK moving QROPS may be something you are researching. With the Lifetime Allowance gone, tax-free cash loopholes closed, and QROPS also included in the estate for IHT from April 2027 – are there merits to leaving it abroad. Here are things to know, from transfer options, fees and costs, and considerations if you’re moving your UK pension back home to the UK. With a useful additional insight into where to find the right scheme, how Brexit impacted QROPS and a case study, this comprehensive QROPS guide to transfers will have you covered.

For anyone resident in the UK, QROPS now offer no additional tax advantages or flexibility when compared with a UK SIPP. The new IHT rules from 2027 also lead to potential delays in the administration of the estate and more complications in settling the IHT bill on the QROPS death benefit. All of this could be avoided by transferring to a UK SIPP and bringing all your retirement savings back under advice.

QROPS guide – what is a QROPS?

A Qualifying Recognised Overseas Pension Scheme (QROPS) is a type of overseas pension scheme which is recognised by HM Revenue & Customs (HMRC). In order to qualify, the scheme must meet HMRC’s requirements and be able to offer certain benefits and protections to members. You can transfer your UK pension to a QROPS scheme, giving you the ability to have your pension savings in your country of residence.

Check out this table of potential QROPS transfers advantages and disadvantages before you continue.

Potential Advantages	Potential Disadvantages
A QROPS can offer tax benefits on both income tax and inheritance tax, depending on your country of residence.	Tax rules can be complex and may change. Make sure you understand the tax implications of a QROPS in both the UK and your country of residence.
You can hold your pension savings in the currency of your choice, giving you protection against currency fluctuations.	Transfers to a QROPS may be subject to a 25% tax charge if you are not resident in the same country as the QROPS.
A QROPS may offer more investment choices than a UK pension scheme.	The QROPS market has been targeted by scammers. Make sure you choose a reputable provider and get financial advice before transferring your pension.

Previous factors when choosing QROPS

There are a few things to that wer the main considerations when looking for a QROPS in the past:

• Jurisdiction – different countries have different tax laws, so you’ll want to make sure you’re comfortable with the tax treatment in the country where the QROPS is based.
• Provider reputation – it’s important to choose a QROPS provider with a good reputation. You can check with financial regulators, such as the Financial Conduct Authority (FCA), to see if a provider is authorised and regulated.
• Fees and charges – QROPS providers charge a range of fees, so it’s important to compare the costs of different providers. Some of the fees you may encounter include transfer fees, annual management charges (AMC), investment management fees and platform charges.
• Investment options – you’ll also want to consider the range of investment options offered by the QROPS provider. Look for a provider that offers a variety of investment choices that are suitable for your risk appetite and financial goals.

Advantages of transferring QROPS to the UK

There are some obvious advantages of transferring overseas pensions into the UK for UK residents:

• Makes pensions simpler – easier for clients and advisers to deal with providers in one country and track their performance
• No ongoing currency conversion on any regular withdrawals. Naturally there may be one at the time of transfer.
• No need to consider double taxation relief, if indeed any is available.
• Fees can be lower, and charging structures more transparent, than QROPS.

QROPS advice process to move to UK SIPP

The QROPS pension transfer process is split up into the following six steps

1. Seek professional financial advice
   The first step is to seek professional financial advice from an experienced financial adviser. They can advise whether a QROPS move to the UK is possible and its costs, implications and availability of a UK provider. Not all UK pension providers will allow transfers from overseas back into the UK.
2. Choosing a suitable pension provider
   Choosing a UK SIPP provider to move the QROPS or QROPS Scheme. Be sure to do your research and choose a pension provider with a good reputation and the right expertise for your needs. This job will be done by the financial advisers if you use one.
3. Complete the paperwork
   You’ll then need to complete the paperwork to start the transfer. This includes filling out application forms for the SIPP provider and transfer forms for your QROPS pension provider.
4. Transfer of funds
   The UK pension provider and IFA will then transfer the funds from your QROPS to the new UK pension provider. This is frequently a manual process and is time-consuming. Often it involves lots of to and fro between providers.

Returning to the UK and bringing your QROPS back home

If you’re planning on returning or are in the UK permanently, you may be able to transfer your QROPS back into a UK-registered pension scheme. This is a complex process that requires a lot of planning, and there are several important points to consider before deciding whether or not to do so.

Check out this table of major considerations if you are thinking of returning to the UK and bringing your QROPS pension with you.

Major Considerations
The rules of the QROPS
Tax implications of returning to the UK
The cost of transferring your QROPS back to the UK
The impact of Brexit
Financial advice

The rules of your QROPS will play a big part in whether you are able to transfer your pension back to the UK. If you are unsure, it is always best to check with your QROPS provider or a financial adviser.

It’s also important to note that the tax rules around bringing your pension back to the UK have changed since Brexit. You may find yourself facing a tax charge if you don’t meet the necessary requirements.

You should also be aware that there may be costs associated with transferring your QROPS back to the UK. It is always best to get financial advice to ensure that you are aware of all the potential costs involved.

Brexit has also had a significant impact on pensions and, as such, may affect your ability to bring your QROPS back to the UK.

If you do decide to return to the UK, it is highly recommended to get financial advice before transferring your QROPS back to the UK.

UK Pension rule changes and impact on QROPS trasnfers to the UK

Bringing a Qualifying Recognised Overseas Pension Scheme (QROPS) to the UK has undergone a major change as a result of the recent reforms to the UK pension tax regime. The following is a guide to the current rules.

The Old System: Lifetime Allowance Enhancement Factors (pre 6 April 2024) for QROPS

Previously, the Lifetime Allowance (LTA) was the total amount you could build up in all your pension pots without triggering an extra tax charge. When you transferred a pension from a Recognised Overseas Pension Scheme (ROPS), including a QROPS into a UK registered pension scheme you were able to apply for an LTA “enhancement factor” which increased your personal LTA to reflect your pension savings while working overseas.

The New System: The LTA has been abolished (6 April 2024 onwards)

As from 6 April 2024 the LTA was abolished. In its place there are now three new allowances that mainly control how much tax-free lump sum you can take from your pensions:

• Lump Sum Allowance (LSA) – a lifetime cap on the total tax-free cash that can be taken from all your pension pots. The standard LSA is £268,275.
• Lump Sum and Death Benefit Allowance (LSDBA) – a combined limit for tax-free lump sums that can be taken in your lifetime and any tax-free lump sum death benefits that can be paid to a beneficiary. The standard LSDBA is £1,073,100.
• The overseas Transfer Allowance (OTA) – limits the value of pension savings that can be transferred to a QROPS from a UK pension scheme without a tax charge. The standard OTA is £1,073,100.

Today’s “Enhancement”: Increasing your LSA and LSDBA

The phrase “enhancement factor” is a thing of the past but there is still a process in place to give credit for pension rights built up overseas when you bring them to the UK. In place of an LTA enhancement factor it will now be possible for an individual who transfers funds from a ROPS (including a QROPS) to a UK registered pension scheme to apply for an increase to his or her personal LSA and LSDBA. The amount of increase is calculated using a method similar to that of the previous “enhancement factor”. The idea is to give credit for any pension growth while you were a non-UK resident and on which UK tax relief was not paid.

It starts with calculating a “recognised overseas scheme transfer factor”. This is broadly calculated by:

• taking the total value of the sums and assets transferred from the overseas scheme.
• subtracting any part of those funds which benefited from UK tax relief (the “relevant relievable amount”)
• dividing the result by the standard Lifetime Allowance (currently £1,073,100) at the time of the transfer (even though the LTA was abolished, this is still used as a reference point).

The resulting factor is used to increase your personal LSA and LSDBA.

Important:

• You cannot double-dip – it is important to note that any tax-free cash lump sums taken from the QROPS prior to the transfer into the UK will not reduce your new LSA and LSDBA. This is a major advantage for some people who may have already taken a slice of their overseas pension pot.
• There is a time limit for notifying HMRC of your entitlement to this increase. You must complete a form APSS 202 which must be submitted to HMRC by 5 April 2025 or five years from the 31st of January after the tax year of the transfer, whichever is the earliest.

Professional advice is crucial – due to the complexity of the rules and calculations, it is highly recommended that you seek professional advice from an advisor who specialises in expatriate and international pension transfers. They will ensure the transfer is made correctly and the increase applied for where applicable.

Inheritance Tax On QROPS and Pensions from 2027 for UK Residents

The introduction of IHT on pensions from April 2027 may cause concern to individuals and families over transferring overseas pensions to the UK, but QROPS will be subject to the same IHT treatment as UK schemes for long-term UK resident clients. It has been confirmed in draft legislation that QROPS which fall within the wider definition of qualifying non-UK pension schemes (QNUPS) are within the estate for IHT purposes. Transfers to a UK scheme should not result in any material change to IHT liability for clients who are going to remain UK resident.

Clients who retire overseas and who have previously been UK residents for 10 out of the previous 20 tax years will still be subject to UK IHT on their worldwide assets for a period after they leave the UK. For someone who has always been UK resident, it will take a maximum of 10 years from them becoming non-UK resident for a QROPS scheme to be outside their estate for IHT once the new rules are in force. The executors of UK resident clients who die and still hold a QROPS scheme will also have to deal with the overseas scheme, in addition to any UK pensions, when they are working out any IHT due. The ability for any IHT due on unused pension funds to be paid directly to HMRC is limited to UK registered pension schemes so that any IHT payable in respect of the QROPS must be paid either by the beneficiary who receives the death benefit, or from the free estate with the executors having to reclaim this from the beneficiary.

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