A Brief Look at QROPS and QROPS Transfers
During the last five or so years, QROPS have gained in popularity as expats realise that they can offer much more in the way of benefits, in comparison to a UK based pension. While their relative complexity means that professional advice is paramount, it is also the case that, in general, QROPS schemes demand that those looking to transfer their pensions into a QROPS must be represented by a professional financial advisor. There are more and more professional QROPS advisors springing up all the time, as this alternative investment option becomes more commonly known and sought after. While general financial advisors may be able to give you limited information regarding QROPS and QROPS transfers, an advisor with specific and broad ranging QROPS experience would be much more valuable – and you should always ensure that your advisor and the company that they work with is fully regulated by the necessary authorities. The first thing your advisor will want to know is details regarding the pensions you currently hold and your plans for moving abroad if you haven’t already done so. From this information they will start to put together recommendations for you.
One of the initial things that your advisor will tell you is that any QROPS that you choose must be on the HMRC approved register – otherwise you may be liable for a financial penalty, on top of tax payments. HMRC requires that QROPS are regulated and taxed as pensions in their source country and any QROPS that they believe are not conducted in this way will be struck off the list. Another thing that you will be advised of is that you and your QROPS do not necessarily have to live in the same country – although you will need to consider the tax liability for both locations, as this could affect your choice quite significantly.
If you haven’t yet retired, your advisor may recommend a higher risk QROPS transfer, as this could potentially offer you much better returns. If you’re risk averse or you have already retired and are looking for more stability, then lower risk QROPS transfers will be recommended instead. You should also be asked whether you wish to have direct involvement in the management of your QROPS. For those who have managed their own SIPPS, you may wish to draw on that investment knowledge and opt for a QROPS that allows you more involvement.
Locations and Fees
Finally, because QROPS transfers can take place across so many different jurisdictions, you have the option to choose a country that allows you to take advantage of all different asset classes, or perhaps choose a QROPS that allows tax free lump sum withdrawals. Make sure that your financial advisor gives you a clear breakdown of the costs involved with QROPS transfers, and keeps you updated with any changes. These can vary quite dramatically between different providers, but you may be able to get your financial advisor to negotiate a discount off the fee.