Can I move my pension out of a ‘QROPS’ now I’m back in the UK?

In 2003 I moved my pension fund. 

As I was going to live abroad, it was suggested that a ‘Qualifying Recognised Overseas Pension Scheme’ (QROPS) would be a suitable arrangement as there was no limit – so I could save tax – on the amount that could be drawn down.

The intention was to ’empty’ the fund into Isas. 

I have been back in UK for some years, and no longer need to use the QROPS wrapper (which is expensive), and having left my former financial firm, my regular stockbrokers look after it now.

I have tried to shift this back onshore and talked to HMRC, my previous pension providers and a couple of pension advisers here, all to no avail.

There seems to be no knowledge of this shift from QROPS to standard UK drawdown onshore.

I pay £1,500 a year to the QROPS people and 0.5 per cent to UK people to administer it, plus transfer charges for the twice a year payments.

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Steve Webb replies: A QROPS is a ‘Qualifying Recognised Overseas Pension Scheme’.

The idea of a QROPS is to allow people who have UK pensions but are moving permanently outside the UK to take their UK pensions with them without severe adverse tax consequences.

According to HMRC, transfers from the UK into a QROPS can be made free of UK tax in some situations…’because they enable people permanently leaving the UK to simplify their affairs by taking their pension savings with them to their new country of residence. This is intended to enable them to continue to save to provide an income when they retire’. Here is the source.

Since the QROPS regime was set up there has been increasing concern that their design was being exploited and not purely used for the original purpose (though I’m not suggesting that this was what you were doing).

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HMRC said: ‘The Government found that QROPS were being marketed extensively as a way of paying amounts or enabling the payment of amounts that are not allowed under UK rules (in particular 100 per cent lump sums) once the UK tax rules no longer apply.

‘This is contrary to the policy rationale for allowing transfers of UK tax-relieved pension savings to be made free of UK tax to QROPS.’ Here is the source.

In response to this, in 2017 the Government introduced a tax of 25 per cent on transfers into a QROPS – the ‘overseas transfer charge’ – which is levied unless the transfer meets one of the conditions for exemption.

This is designed to make sure that such transfers are in line with the original policy intent behind the creation of the QROPS regime.

So, for example, the 25 per cent tax is not levied if a person:

– takes their pension savings with them to their new country of residence OR

– moves to a different country to their pension savings but both are within the European Economic Area OR

– transfers to a QROPS provided by their employer in respect of their current employment.

As you will have gathered from the above description, QROPS are designed for people who leave the UK and are intending this to be on a permanent basis, enabling them to take their pensions with them.

This is why information about transferring from a QROPS back into a UK scheme is quite hard to come by – it is not something that happens very often.

However, there is no barrier, in principle, to you making such a transfer. Indeed, HMRC’s tax manual does have a section headed ‘Transfers to a registered pension scheme from a QROPS or former QROPS’. You can find this here.

As you will see from reading HMRC’s guidance note, this is a highly technical area and I would strongly recommend that you take advice before going ahead with your proposed transfer.

But if you share this information with one of the advisers you have spoken to, hopefully this will give them the information that they need to assist you in deciding if this is the best option for you.