QROPS in the USA: Essential information
Last updated: 9 October 2017
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"Even though Britain’s HRMC has approved QROPS in the United States, until recently the IRS would not permit them"
QROPS in the USA have not always been available for British expats. Only in recent years have British expats in the USA had access to them, although under strict regulations.
A QROPS (Qualifying Recognised Overseas Pension Scheme) is a pension scheme which is very similar to a SIPP (Self-Invested Personal Pension) in that it provides you with more control and flexibility over your pension funds.
However, there are two major differences between a QROPS and a SIPP:
- The funds invested in a QROPS are held in a jurisdiction other than the UK
- QROPS are only available to UK non-residents who live in places such as the USA
The benefits of a QROPS in the USA
There are several major advantages to transferring your pension to a QROPS if you live in the USA, including:
- No requirement to purchase an annuity at any time
- You can consolidate multiple pension schemes into a single QROPS
- Increased flexibility on where you can invest your funds - you're not limited to the UK or the USA
- You can pass 100% of your remaining funds to your partner or beneficiaries
Issues with QROPS in the USA
Until recently it was not possible for British expats to import a UK pension fund to a QROPS if they were resident in the USA either as a stand-alone scheme or in amalgamation with a USA-based pension arrangement such as an IRA or a 401K.
While UK regards USA as a suitable jurisdiction for receiving an exported British pension, the Internal Revenue Service (IRS) in USA imposes a restriction on such imports. There is an irrevocable disparity between the coding systems for pensions in each country. Even though Britain’s HRMC has approved QROPS in the United States, the IRS will not permit them to accept transfers of British pension funds.
Furthermore, British occupational pensions in general are regarded by USA and Canada as being over generous by their standards. The problem for people with UK pensions is that US laws do not recognise them and therefore US residents must report funds to the IRS and may be liable to pay US tax on the growth of any pension funds, as well as the income from it.
However, it is now possible for British expats living in the USA to legitimately transfer UK pensions into a QROPS.
Overseas transfer charges
On 8th March 2017, the UK government introduced a new overseas transfer charge which could affect many QROPS transfers which were requested on or after 9th March 2017. If you live in the USA and are considering transferring your UK pension to a QROPS outside of the USA.
To find out more, please read our detailed article covering overseas transfer charges >
Get clarity on your pensions and QROPS options
If you unsure of your position, or would like more information about pensions and QROPS in the USA, request a free pension consultation with an independent financial adviser by submitting your details using the form on this page.
During your consultation the adviser will help you understand the complexities, benefits and options of a QROPS in the USA and there is no obligation or pressure to take any of the advice on offer.