What specifically do I need to do to be eligible to transfer my pension to a Qualifying Recognised Overseas Pension Scheme (QROPS)? And what's the "5 year rule" all about?
First thing - the "5 year rule" is vitally important. A QROPS realistically is only of any benefit to somebody if they intend to live or work abroad for an extended period of time, or if they are already living abroad.
The "5 year rule" relates to the legislation to which QROPS providers must adhere. You must be non UK resident for a period of 5 complete tax years. That's tax years, not calendar years - 6 April to 5 April. It might end up being nearer 6 years for some people.
Within the "5 year rule" period, the QROPS provider must report back to Her Majesty's Revenue and Customs about any capital or income payments that are made to the pension fund holder, and therefore the scheme must fall inline with what you could have done within a UK pension scheme anyway. So you can’t take too much income out and you can’t take extra tax free cash.
Beyond 5 years, the reporting requirements cease and therefore there is more flexibility in the options available for taking income from the QROPS pension scheme and more flexibility in the permitted investments as well. You then fall under the guidelines of your local jurisdiction and that might allow more esoteric types of investment - it can even include residential property.
Now this doesn't mean you have to leave Britain and never return. To be classified as non resident, you don't have to be outside of the UK for the whole 365 days of each year in the 5-year period. The UK authorities will let you in for a few days!
The way it works is most European jurisdictions if you want to be resident there, you need to spend at least 183 days in that country. Now there is also a rule within the UK which says you shouldn’t really spend more than 91 days. Residency is complications, but a reasonable rule of thumb is to not spend more than 91 days in the UK during the 5-year period. It's not a prison sentence, but equally the rules are quote specific.
Main point - discuss your specific situation with a Financial Services Advisor.
QROPS are overseas pension schemes specifically designed to accept transfers for people in the UK. Generally, to transfer in you need to be non-resident in the UK for tax purposes. The QROPS needs to have similar rules to UK schemes for the first 5 years for which you are non-resident. After that it doesn't - so you may be able to take the whole fund in cash.
We can't provide you with specific advice on QROPS and you. That's what you are paying your financial adviser to do. If you don't trust him, find another one.