Residential property has long been an asset class pension savers wish to invest in, driven by strong yields and, as far as the UK is concerned, a fast pace of recovery.
HM Revenue and Customs (HMRC) have considered whether to include residential property on many occasions, but so far the decision has always remained negative – that investors cannot invest in residential property in a UK pension.
As QROPS have to follow the same rules as UK pension schemes, they too face a ban against residential property.
Even after the five-year reporting requirement ends an investor still can’t invest in this asset class – even when local rules allow.
What’s the problem?
The issue HMRC have with investing in residential property is the idea that it can be used for ‘personal use.’
This would be where the member utilises the property within his or her pension, and so in effect receives a benefit from the pension scheme before they have reached retirement age.
Whilst this will not be the case in every circumstance, the difficulty of policing this area means HMRC has made the decision not to permit it.
However, residential property funds are in fact allowed – which is just the tip of the investment iceberg in a QROPS.
Investing in commercial property with a QROPS
The range of investments allowed in a QROPS is much wider than in a traditional onshore pension.
It offers access to more currencies, an increased range of commodities, offshore bonds and the ability to benefit from international markets.
This includes investments into collective investment funds such as unit trusts, exchange traded funds, insurance company funds, investment trusts and open ended investment companies; stocks and shares like UK shares, overseas equities, bonds, guilts, futures, options, and permanent interest bearing shares; and other investments such as traded endowment plans, and helpfully, commercial property and land – all over the world.
Can I manage my own QROPS assets?
Depending on the jurisdiction, some schemes – including those based in Gibraltar – allow an investor to manage their own assets with total freedom, something termed self-investment.
Others contain restrictions, and may have to be managed by a professional.
In most cases, you can appoint an investment advisor of financial advisor in most cases to make the investment decisions on your behalf. The optimum QROPS for your needs will depend on the level of involvement you wish to have with your QROPS fund investment.
To find the best option for your circumstances and needs, you should discuss QROPS solutions with an independent financial advisor experienced in the QROPS industry.
