Qualifying Recognised Overseas Pension Schemes (QROPS) are highly attractive to those who no longer live in the UK or are planning to leave permanently. By far their biggest attraction is the tax breaks they offer. You can avoid paying UK tax on your pension income, which in some cases can be as high as 50 per cent in the top income tax bracket.  Instead, depending on which country you move to, tax rates on this income could be zero. For example, it is unlikely you would be taxed on foreign pension income if you are based in Singapore, Hong Kong, Malaysia and most of Asia.  However, Gavin Pluck, European director of Guardian Wealth Management, said: “There is little doubt that QROPS are a useful and popular financial planning tool, but our experience shows that expats are increasingly being blinded by tax sweeteners, rather than taking full stock of the right scheme for their particular retirement aspirations. As choice increases, I believe it is crucial expats should address any regulatory implications and not be swayed simply by an attractive tax inducement.“  Mr Pluck added: “Unfortunately, this is a general misunderstanding among British expats. The rules that govern these schemes are those of the regulatory authorities in which the scheme is based, not the FSA.”  A company or personal pension can be transferred into a QROPS along with a pension already being drawn. Only your state pension or an annuity can’t be switched.  Martin Wright, overseas pension expert at the Fry Group, added: “There has been some heavy selling of QROPS based solely on the tax breaks but there are many factors to consider. For example, what other rights are you giving up when you transfer out of a UK scheme into QROPS?”  These could include a guaranteed minimum pension, spouse’s pension, death benefits, guaranteed annuity rates, compensation schemes or inflation-proofing.  QROPS are also designed for expats who plan on living and working overseas for a long period. Expats on short-term assignments or planning on heading back to the UK after a few years are advised to review their current UK pension before considering a transfer out.
Expats are being warned about the dangers of being seduced by the tax breaks   of QROPS without considering the risks