Understanding the Latest QROPS Changes and Overseas Transfer Rules
In this article, we look at recent changes to Qualifying Recognised Overseas Pension Schemes (QROPS) – useful reading for those studying for any of the CII R04, J05, or AF7 exams.
This article is correct as at 25 March 2025.
Qualifying Recognised Overseas Pension Schemes (QROPS)
A Qualifying Recognised Overseas Pension Scheme (QROPS) is a Recognised Overseas Pension Scheme (ROPS) that has notified HM Revenue & Customs (HMRC) that it has met their requirements.
QROPS can receive transfers from UK-registered pension schemes without incurring unauthorised payment charges, provided they meet all qualifying conditions.
To qualify as a ROPS, a scheme must be:
- Based in an EEA member state, Norway, Iceland, or Liechtenstein; or
- Located in a country (excluding New Zealand) with a UK double taxation agreement (DTA) covering pensions; or
- In any other country (including New Zealand), provided:
- Benefits cannot be taken earlier than under a UK-registered pension scheme.
- Local residents can join.
Additionally, if tax relief applies to non-resident members, it must also:
- Be available to resident members on similar terms.
- Apply regardless of residency at the time of joining or during membership.
Schemes that meet these ROPS criteria and notify HMRC may be awarded QROPS status.
QROPS and the Overseas Transfer Charge
Historically, transfers to a QROPS were subject to a 25% overseas transfer charge unless certain conditions were met.
The charge could be avoided if the QROPS was:
- In the same country where the member was resident.
- In Gibraltar or an EEA country, with the member being UK resident or resident in an EEA country or Gibraltar.
- An occupational scheme where the member was an employee of a sponsoring employer.
- An overseas public service scheme where the member’s employer participated.
- A pension scheme of an international organisation where the member was employed.
A QROPS must confirm its eligibility to HMRC and reconfirm every five years. If a scheme loses QROPS status within five years of a transfer, the charge may be applied retrospectively.
Lifetime Allowance and the Overseas Transfer Allowance
Previously, transfers to a QROPS before age 75 were tested against the lifetime allowance under Benefit Crystallisation Event 8, with any excess taxed at 25%.
Under the new regime, the Overseas Transfer Allowance (OTA) allows members to transfer up to their former lifetime allowance into a QROPS tax-free. Any excess is subject to the 25% overseas transfer charge. The OTA operates separately from the lump sum and lump sum and death benefits allowances.
Autumn Statement Changes
A drafting loophole in the new rules meant UK residents could potentially use multiple tax-free allowances by crystallising UK pensions, taking full tax-free cash, and then transferring other pensions overseas. The Autumn Statement closed this gap by restricting the exemption from the OTA to cases where both the member and the scheme are in the EEA or Gibraltar.
A transitional period applies for transfers requested before 30 October 2024, but this option is unavailable for future applicants.
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