Overseas pensions: set up your scheme for migrant member relief
How to become a qualifying overseas pension scheme (QOPS) so that members of your scheme can claim UK tax relief on pension contributions.
Your members and their employers can claim tax relief on their pension contributions if the member moves to the UK after joining your scheme. This is known as migrant member relief.
Your scheme needs to be a QOPS for your members to get tax relief. The scheme must:
- be an overseas pension scheme
- report certain information to HM Revenue and Customs (HMRC)
Overseas pension schemes
Your scheme must be based outside of the UK and can’t be a registered pension scheme. It must also meet the following rules.
The tax recognition test
Your scheme must be:
- 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 pensions. The country (except for Australia) must only give tax relief on either:
- pension contributions
- payments out of the scheme
Australian pension schemes must be complying superannuation plans.
The regulatory requirements test
Your scheme must be regulated by a pension scheme regulator in the country your scheme is run from.
If a regulator doesn’t exist in your country for your type of pension scheme, your scheme must either:
- be based in the EU, Norway, Iceland or Liechtenstein
- have rules to make sure that:
- at least 70% of pension savings that have received UK tax relief are used to pay a pension for the life of the member
- pensions can’t be paid before the age of 55 unless the member has retired because of ill-health
There are different rules for pension schemes run by international organisations, like the EU or UN.
To be an overseas pensions scheme, these schemes must:
- have rules that at least 70% of each member’s pension savings are used to pay a pension for the life of the member, if the savings have received UK tax relief
- not make pension payments to members before the age of 55 unless the member has retired because of ill-health
- not be a registered pension scheme
- be based outside the UK
Information your scheme must report
You must to tell HMRC about ‘benefit crystallisation events’ for migrant members of your scheme. Use form APSS252 to do this.
Benefit crystallisation events occur when the member:
- starts taking a regular income from their pension savings before they’re 75
- gets an increase in the annual pension payments they’re receiving, which is more than the greater of:
- the retail price index
- 5% of the previous year’s pension payment
- buys a lifetime annuity before their 75th birthday
- puts their pension savings into a fund before their 75th birthday that can be accessed at any time (known as a ‘drawdown’ pension)
- reaches their 75th birthday with pension savings that haven’t been accessed
- reaches their 75th birthday with money left in a drawdown pension
- dies before their 75th birthday and within 2 years their uncrystallised pension savings are used to pay a lump sum death benefit or a pension to their beneficiaries
- transfers their pension to a qualifying recognised overseas pension scheme
- is paid a:
- pension commencement lump sum
- uncrystallised funds pension lump sum
- serious ill-health lump sum
- lifetime allowance excess lump sum
- stand-alone lump sum
- is overpaid a lump sum because of an error calculating their pension entitlements
- didn’t begin taking their pension before they died because you couldn’t confirm they were entitled to their pension (for example, you couldn’t contact them)
- wants to test their pension savings against the lifetime allowance before they start taking a pension or their 75th birthday
When you report a benefit crystallisation event you also need to tell HMRC if the pension savings have been used to get:
- a flexible access drawdown pension
- an uncrystallised pension lump sum
- a flexible lifetime annuity
Tell HMRC you’re a QOPS
To be a QOPS, you must tell HMRC that your scheme:
- is an overseas pension scheme
- will report information on pensions that have received UK tax relief
You can use form APSS250 to do this.
When you’ve given HMRC the required information they’ll send you a letter, which will include your QOPS reference number.
You must make sure your scheme meets the rules to be a QOPS at all times if your members want to receive tax relief on their contributions.
When you stop being a QOPS
You must tell HMRC if your scheme stops being a QOPS.
HMRC can also decide your scheme isn’t a QOPS if you don’t report the necessary information to HMRC.
Any pension contributions you receive from migrant members after you stop being a QOPS won’t receive UK tax relief.