QROPS for US Residents – FATCA & IRS Compliant

For British pension holders in the US, transferring into a Qualifying Recognised Overseas Pension Scheme (QROPS) is now commonplace. These pension solutions are widely accessible to all US residents or nationals who have accrued pensions from their time working in the UK, and are an invaluable aspect of financial planning that meets the regulations imposed by FATCA.

There are a few financial advisers who see transfers to QROPS for US residents as being overly complex​and fee-laden, but a new batch of FATCA-compliant schemes are now readily available with low fees and a simplified process. It is the introduction of these schemes – all based in the regulated jurisdiction of Malta – which has sparked a surge in transfer activity Stateside.

Specialist

It is true that QROPS are a specialist area of finance, but as we go into the sixth year since overseas schemes have been tailored for US compliance, a host of reputable and experienced financial institutions are now helping the large number of British pension holders now living in the US – a number thought to exceed 300,000 – with their own QROPS transfer.

That said, extensive knowledge of US tax legislation is required in order to meet the demands of the IRS. It was in 2009 that the first QROPS was created as a solution to the issues brought up by FATCA, and there are now a huge variety of schemes offering the same solutions.

QROPS based in the jurisdiction of Malta benefit from a Double Taxation Agreement between the US and the EU member state, meaning any pension scheme based there is viewed by the IRS as being transparent and not considered as a vehicle for potential tax evasion.

Simplify

Keeping a UK pension where it is creates the annual burden of having to complete a host of reporting requirements, the forms include the FBAR FinCEN Report 114, the IRS 3520 and the 8938. A cursory glance at these forms is enough to bring on quite a migraine, but once a transfer has been completed, the reporting process becomes simplified, and guidelines relating to the QROPS’ individual reporting requirements will be issued.

If a QROPS transfer is completed compliantly, there is no tax liability, and with more schemes entering the fray, the initial fees attached have come down considerably.

Benefits of QROPS include the ability to consolidate multiple pensions, opening up a wider array of investment options, tax-efficiency, a choice of currency, and the stability in knowing that the age of access will be set in stone, meaning retirement plans can be confirmed without fear of uncertainty.

For more information on whether a US-compliant QROPS could work for you, contact us today to be put in touch with a recommended specialist.