All of the acronyms around overseas pensions are confusing. What do they mean? Are they talking about the same things, or are they different?
QROPS stands for Qualifying Recognised Overseas Pension Schemes. They have been around since 2006, and offer freedom from UK income and inheritance tax. However, there are a number of strings attached and rules that must be followed carefully to ensure that the tax exemptions are preserved.
For example, a QROPS investor must live outside of the UK for tax purposes for at least 5 years following the transfer of their pension. Returning within that time may give rise to hefty tax liabilities and possibly even a penalty.
QNUPS stands for Qualifying Non UK Pension Scheme. Technically, a QROPS is a QNUPS, but the term is also being used among financial advisers for overseas schemes that do not meet the strict QROPS criteria but nevertheless offer considerable benefits to investors.
In fact, the existence of a set of overseas pensions which are not QROPS offers the chance for investors to put a variety of assets into the pensions that are not investment controlled. When a scheme is investment controlled by HMRC it means that the trustees can only invest in approved assets. Unlike QROPS, QNUPS permits residential property (but not the investor’s own residence), antiques and fine wines to be put into the vehicles.
The schemes are very new, so have not been tried and tested yet. Accordingly, no one has yet pushed the boundaries of what HMRC will stand.
Apart from the investment freedom that QNUPS customers benefit from, there are also no limits on when and how much you can put into the schemes. Accordingly, a QNUPS investor can technically continue to add to his pension fund into his eighties and beyond.
There is also no maximum limit on how much can be contributed. So you can plough as much as you are able into the scheme.