Since 2009 the benefits of QROPS have been well documented, and rightly so. Many QROPS candidates have been able to find freedom and tax advantages by moving their pension abroad. However there are also potential pit falls for clients looking to transfer their funds.
The main danger is represented by taking poor advice from somebody not qualified to give it.
Unfortunately this does happen on occasion, this is why it is important to pay specific attention to trying to research your financial advisor in order to be able to ascertain whether they can offer you the level of experience and advice you require.
Some notable advantages of QROPS:
- Better tax rates
- Fund size is unrestricted
- Lifetime allowance and annual allowance do not apply to contributions and fund growth
- Properly maintained and managed QROPS are virtually free of UK tax and IHT (Inheritance Tax)
- Withdrawals in lump sum form are greater as only 70% of fund is designated for income during retirement
- Greater control and flexibility in QROPS as providers do not have to report to HMRC annually
- Multiple jurisdictions involved in the scheme meaning QROPS can be tailored for specific needs
Some disadvantages:
- Some schemes cannot be returned to UK
- Some overseas regimes impose a limit on the amount of contributions
- Some also impose tax schemes during the accumulation of contributory funds
- Costs and fees involved in the set up can be expensive
- UK pension schemes are very transparent, some QROPS are not so transparent
- Withdrawals could potentially face local taxes in the country in which the individual resides
- Individual QROPS can lose HMRC recognition
- Advisors overseas may not be regulated or qualified in the same way they are in the UK
- QROPS are not regulated by the FCA
A good advisor will be honest with you and will give you the entire picture when looking at QROPS.
While the scheme has benefitted some enormously, it is not for everyone, and it should be approached and assessed on an individual basis. You should be told where your money is going to be held, data regarding the savings and benefits you will be receiving by entering into the scheme, and a full disclosure relating to any charges or fees applied by the broker or advisor.
There is no substitute for knowing that you can trust the person dealing with your finances. Peace of mind in that regard is worth more than anything else.
