Overseas Pension Transfer Rules

Overseas Pension Transfer Rules – Withdrawal Guidelines

QROPS or Qualifying Recognised Overseas Pension Scheme, is an overseas pension scheme that is in compliance with specific guidelines and requirements set by HMRC or Her Majesty's Revenue and Customs. Such compliant schemes are eligible to receive transfers from United Kingdom (UK) Pension Benefits without incurring any unauthorized payment or scheme sanction charges. While this greatly benefits Indians who have worked in the UK and want to move back to India, there are a few rules and guidelines that need to be taken into consideration before you make the decision. These can easily be segregated into two types, overseas transfer rules, and QROPS withdrawal rules.

Overseas pension transfer rules:

  • open to residents in the country your scheme was set up in
  • registered with the country’s tax authority as a pension scheme

Your scheme’s country must have a system to tax personal income and give tax relief on pension contributions and payments out of the scheme.

QROPS withdrawal rules:

Once you transfer your pension to a registered QROPS scheme you automatically initiate a 10 year reporting period where any unauthorized withdrawals need to be reported to the British tax authorities by the qrops providers. Unauthorized withdrawals are any withdrawals made before the age of 55 will be taxed. Withdrawal of funds before the age of 55 could cause you to face a significant tax charge of up to 40% of the fund’s value, and an additional surcharge of up to 15%.

After completion of age 55, you can withdraw up to 30% of your pension as a tax-free lump sum and remaining as an annuity or you can draw the entire amount as annuity.

The following pension schemes are eligible for QROPS transfer:

  • Occupational scheme
  • Final salary scheme
  • Defined benefit scheme
  • Defined contribution scheme
  • Self-invested personal pension scheme
  • Small self-administered scheme