Summary
- QROPS or Qualifying Recognized Overseas Pension Scheme, is an overseas Pension that HMRC says may receive transfers from U.K.-registered pensions without U.K. “unauthorized payment” (tax charges), but only if strict conditions are met. A QROPS must first qualify as a ROPS (meets statutory conditions), then be notified to HMRC.
- HMRC’s ROPS list is the only place to check whether a destination scheme claims to qualify at a point in time (HMRC doesn’t “approve” individual transfers). The list changes frequently.
- According to the U.K. Government, 133,000 QROPS transfers completed globally between 2010 and 2025. A significant proportion to U.S. residents were reportedly mis-sold.
Aren’t QROPS Banned in the U.S.?
There are currently no U.S.-based ROPS/QROPS on HMRC’s published list, largely because HMRC introduced a strict pension-age test in 2015 (no access before 55, with few exceptions). That change led to wholesale removals and suspensions of non-compliant schemes, including the prior U.S. entrants. In practice, you cannot transfer a U.K. pension into a U.S. IRA/401(k) via QROPS.
The “ban” isn’t an IRS prohibition, but HMRC’s rules and current market leave no U.S. receiving scheme to qualify as QROPS. For U.S. residents QROPS is therefore a dead end.
UK tax rules that still bite (even after you move)
- Overseas Transfer Charge (OTC): transfers to QROPS are 25% taxed unless you meet an exclusion.
- From 30 Oct 2024, the old EEA/Gibraltar exemption was removed. Now you must be resident in the same country as the QROPS (or meet employer/public-service exceptions) to avoid the 25% charge.
- 10-year “U.K.-tax look-back” (member payment charges) and HMRC reporting: For transfers on/after 6 Apr 2017, payments from a QROPS can be taxed under U.K. rules for 10 full tax years after the transfer, regardless of where you live. QROPS also has 10-year reporting of payments to HMRC.
- Restrictions for EEA schemes: From 6 Apr 2025, EEA-based OPS/ROPS must meet the same conditions as the rest of the world (no legacy treatment).
- From 6 Apr 2026, U.K. registered schemes must have a UK-resident scheme administrator (not an EEA admin).
Why many QROPS were mis-sold
- No genuine long-term overseas retirement intent, but transferred anyway (often to Malta, Gibraltar, Isle of Man) to create “tax-free” cash or flexible access.
- OTC not explained or residency likely to change within five years/“relevant period” triggering retrospective charges.
- High-charging structures (offshore bond wrappers inside the QROPS), opaque fees, illiquid/esoteric funds.
- Unsuitable advice on DB transfers as the funding source for a QROPS, an area where the FCA and FSCS have upheld many complaints and paid compensation.
If your Advice firm was FCA regulated and has failed or can’t pay compensation, The Financial Services Compensation Scheme (FSCS) may compensate, typically up to £85k for bad advice. Once the original company (if still in existence) has responded, consider independent complaint assessment from The Financial Ombudsman Service (FOS).
U.S. vs Malta: Why it matters now
QROPS advisors sold Maltese Personal Retirement Schemes (MPRS) claiming U.S./Malta treaty protections (tax-free contributions of appreciated assets; tax-free growth/distributions).
On 21 December 2021, the U.S. and Malta signed a Competent Authority Arrangement (CAA) confirming that Maltese personal retirement schemes that accept non-cash contributions or lack earned-income limits do not qualify as “pension funds” under the U.S./Malta treaty. Accordingly, treaty benefits under Articles 17(1)(b) and 18 generally do not apply. The IRS also warned it is actively examining such arrangements and in June 2023, the Treasury and the IRS issued proposed regulations identifying certain Maltese PRS transactions as “listed transactions”. As of Q3 2025, these remain proposed, alongside the monetized installment sale rules (Aug 2023).
Treaty shelter arguments for Malta pensions have been shut down by the CAA and the IRS’s enforcement posture. U.S. taxpayers involved should assume increased risk and seek specialist U.K./U.S. cross border tax counsel
U.S. vs Malta: Why it matters now
QROPS advisors sold Maltese Personal Retirement Schemes (MPRS) claiming U.S./Malta treaty protections (tax-free contributions of appreciated assets; tax-free growth/distributions).
On 21 December 2021, the U.S. and Malta signed a Competent Authority Arrangement (CAA) confirming that Maltese personal retirement schemes that accept non-cash contributions or lack earned-income limits do not qualify as “pension funds” under the U.S./Malta treaty. Accordingly, treaty benefits under Articles 17(1)(b) and 18 generally do not apply. The IRS also warned it is actively examining such arrangements and in June 2023, the Treasury and the IRS issued proposed regulations identifying certain Maltese PRS transactions as “listed transactions”. As of Q3 2025, these remain proposed, alongside the monetized installment sale rules (Aug 2023).
Treaty shelter arguments for Malta pensions have been shut down by the CAA and the IRS’s enforcement posture. U.S. taxpayers involved should assume increased risk and seek specialist U.K./U.S. cross border tax counsel
If you have a QROPS (especially Malta/Gibraltar) and live in the U.S.
Map structure & history
Confirm the scheme was on the HMRC ROPS list at the date of transfer; collect transfer request and completion dates (for OTC transitional relief and the 10-year clock).
Identify source funds (DB vs DC), any OTC paid, and whether any payments have been made since. These can trigger UK member payment charges within the 10-year period.
Consider U.S. Tax & Reporting
- FBAR (FinCEN 114) if aggregate foreign accounts >$10k at any time in the year. Due 15 April (automatic extension to 15 Oct).
- FATCA Form 8938 if “specified foreign financial assets” exceed thresholds; foreign pensions generally count.
- PFIC (Form 8621) if the QROPS holds non-U.S. funds/ETFs (common).
- Forms 3520/3520-A may apply if the QROPS is treated as a foreign trust for U.S. purposes—this is fact-dependent and unsettled; specialist counsel should determine status.
Malta
If the scheme is a Maltese personal retirement scheme, evaluate treaty-based positions already taken (e.g., prior non-inclusion of income), potential need for protective disclosures (e.g., Form 8886 if/when listing rules are finalized), and whether corrective filings (e.g., streamlined procedures) are appropriate.
Investment review (reduce U.S. tax drag and risk)
Replace PFIC-heavy holdings with U.S.-domiciled ETFs/stocks if permitted by the QROPS platform (and if U.S. custody/withholding can be operationally supported). PFIC compliance costs often swamp any theoretical QROPS benefits.
Transferring back to a U.K.-registered Self Invested Personal Pension (SIPP)
HMRC allows transfers from QROPS to a U.K.-registered pension as a recognized transfer (not a contribution). This can simplify U.S. reporting/investments and eliminate the QROPS 10-year rule going forward. Care is needed if any benefits are already in payment and consideration of the April 2027 changes to Inheritance Tax on U.K. Pensions and the effect on personal estate planning, given the £325,000 Nil Rate Band exemption.
Complaints & redress
If advice was U.K.-regulated and unsuitable, pursue the firm/FOS; where the firm has failed, consider FSCS (up to £85k for bad advice), although note that time limits that apply to when advice was given or you could have reasonably known of an issue. Keep an eye on ongoing class-action activity around QROPS mis-selling.
When is a QROPS still appropriate?
In very few cases, for example, someone living long-term in the same country as the QROPS, where the local scheme is well-regulated, cost-competitive, free of PFIC issues, and the OTC is avoided because residency aligns with the QROPS jurisdiction. Post-October 2024 rule changes make EEA “arbitrage” routes largely obsolete.
QROPS Checklist for British Expat U.S. residents
- Stop: don’t take distributions until tax position is mapped with help from a cross-border U.K./U.S. advisor.
- Verify: scheme was on HMRC’s ROPS list on transfer date; gather all transfer/payment documents.
- Assess UK exposure: OTC at transfer and 10-year member-payment exposure on withdrawals.
- Fix U.S. filings: FBAR / 8938 / (possible) 3520/3520-A / 8621 for PFICs.
- Malta: evaluate CAA impact; consider protective disclosures; consult U.S. tax counsel on remediation.
- Consider U.K. SIPP re-transfer to simplify and remove QROPS ongoing U.K. charge/reporting, subject to rules and April 2027 IHT Pension changes.
- Redress: if mis-sold, consider complaints to the firm/FOS and FSCS.