What is QROPS or ROPS?

To make a compliant UK pension transfer – and reduce your exposure to a potential tax penalty of up to 55% on the total transfer value – you must transfer into a fund on the HMRC recognised Overseas Pensions Scheme (ROPS) list. In 2015, this list replaced the HMRC’s Qualified Recognised Overseas Pension Scheme (QROPS) list which had been in place since 2006.

While the overseas fund must appear on the ROPS list to make a compliant transfer, since 2015 HMRC has made it the sending and receiving pension/superannuation funds responsibility to avoid any unexpected tax liabilities. HMRC doesn’t guarantee transfers to ROPS list funds will be free of UK tax. As such, it is vital, that you seek specialist advice on QROPS/ROPS transfers to ensure penalty taxes are not incurred.

More detail about HMRC’s QROPS list and ROPS list.

Nik Hayes a former UK Chartered Accountant now living in Australia, explains why he sought expert QROPS advice for his own transfer, despite having substantial financial expertise himself:

Effects of changes to UK pension regulations in 2015

On 1 July 2015, the HMRC ROPS list replaced the HMRC Qualified Recognised Overseas Pension Schemes (QROPS) list, which was put in place in 2006.

Changes were introduced to UK pension transfer regulations as part of the Freedom & Choice in Pensions legislative changes.

Along with a slight change in name, some of the fund eligibility requirements were also changed. Many funds – both in Australia and globally – were removed from the list and are no longer eligible to transfer funds into.

A major impact of these changes is HMRC now only allow lump sum overseas UK pension transfers for those individuals who are 55 years or over and are members of the appropriate Recognised Overseas Pension Scheme (ROPS).

Until these changes, Australia had been the leading destination for pension transfers: unsurprising given the high number of British expatriates in Australia.

HMRC provides a list of approved (ROPS) pension schemes based outside the UK.

Failure to transfer into a scheme on the ROPS list could result in an unauthorised tax penalty of up to 55% of the total transfer value.

Since 2015 the vast majority of Australian Super Funds are unable to comply with UK Pension laws and as such are unable to receive UK Pensions transfers.

Despite these changes, it’s still possible to transfer a UK pension to Australia. Now more than ever it is vital to seek specialist advice on a QROPS/ROPS transfer for the following reasons:

Avoid a penalty tax of up to 55% on transfer value

Avoid the possibility of a HMRC penalty tax of up to 55% of the total transfer value for a non-compliant transfer

You’re responsible for establishing whether your transfer will incur any taxes

HMRC doesn’t guarantee that schemes on the ROPS list are approved or qualified for UK pension transfers. It is the member’s responsibility to ensure the overseas scheme meets all the necessary HMRC requirements. The following message appears on the HMRC website: “HM Revenue and Customs (HMRC) can’t guarantee these are Recognised Overseas Pension Schemes (ROPS) or that any transfers to them will be free of UK tax. It is your responsibility to find out if you have to pay tax on any transfer of pension savings.”

If your enquiry relates to a UK State Pension i.e. the Old Age Pension from your national insurance contributions or if you have an unfunded Civil Service Pension e.g. NHS, Teachers, Police, Armed Forces etc.. then our e-book will not be relevant. You need to contact your UK scheme directly as they are not eligible to transfer to Australia.

For further information please download our FREE UK Pension Transfer E-book or contact our client service team on 02 8904 9793