One of the biggest problems for those investing in a Qualifying Recognised Overseas Pension Scheme (QROPS) is that their investments are often placed into bonds for tax efficiency rather than for improving investment returns.
Now, several QROPS providers are looking at bringing down costs for retirement savers by giving them more flexibility to manage their funds through investment platforms.
Potential QROPS investors should understand that platforms are not really financial products, but a flexible service to buy and place investments without pay transaction charges
Many platforms let investors switch their assets without racking up unnecessary charges. They also come with less paperwork.
Tax advantage
One of the first firms set to bring in a QROPS platform is London & Colonial (L&C), which is launching a Gibraltar-based QROPS with onshore or offshore options.
Adam Wrench, L&C product development manager, explained the firm has worked on the launch for some time.
For most investors, a QROPS puts their assets into an offshore bond for tax advantages.
However, by bonds expose them to two charges, one for the QROPS and another for the offshore bond.
By using a platform, he said, these costs are significantly reduced while still delivering the same tax benefits.
Potential risk
“Investing via a platform is, as far as we see it, is the most efficient way of investing a client’s assets within a QROPS,” he said.
“Many clients will have become used to a certain level of service, not to mention accessibility to funds, while in the UK and may even have a strong affiliation to one platform. We aim to help them continue this and hopefully, by offering the onshore option too, drive competition in the offshore market both for QROPS and platforms.”
He added that running costs and investment performance are obviously high on the list of must-have features for prospective QROPS investors, but they should not divert their attention away from other potential risks, like cross-border tax issues and estate planning.
Platforms are already popular online investment tools in the UK that let retirement savers cut costs by managing their own funds online.
Many onshore investment companies run platforms they offer a wide range of investments, while the providers refund some or all of the commission that would go to an international financial adviser based outside the UK.
