QROPS can be available in many countries around the world. Visit the HMRC’s website at
http://www.hmrc.gov.uk/PENSIONSCHEMES/qrops-list.htm and those that agree to be listed can be seen.
For the majority of individuals it can be more advantageous to use QROPS in places that they don’t reside. The best example of this is The Channel Islands or Isle of Man. There are household names and large Merchant Banks that provide QROPS. The regulatory and compliance regimes are all government controlled in a jurisdiction with no language barriers. Funds can be held in and paid out in Sterling, Euros or US Dollars.
These jurisdictions have an existing structure which will not change in the foreseeable future. The Government Regulatory controls and investor compensation schemes can be better than the UK. The Guernsey Financial Services Commission is a good example of a regulatory body http://www.gfsc.gg/
Having an awareness of where your QROPS will be held is essential. Learning how the regulatory regime works in far away shores and whether there is Government backed controls can be a hurdle and perhaps a risk not worth taking.
The advice you get on QROPS should be totally transparent. QROPS charges, if done correctly, are not different to a UK based Personal Pension or Self Invested Personal Pension (SIPP).
When dealing with offshore arrangements if the scheme and charges are opaque or you don’t know exactly who you are dealing with, then we advise not to do it.
Example of Charges:
There are two main components to a QROPS.
• The Master Trust which is the entity authorised as a QROPS. The Trust administrators have given HMRC an assurance that the scheme is suitable to receive UK Personal Pension transfers and they will notify HMRC of transactions for five complete UK tax years after you become non UK resident.
• The underlying investments can be cash, and asset backed such as collectives, equities and property.
You will normally have a Master Trust provider and then decide with your Financial Adviser where the underlying investments are placed.
There is dual charging as you need to pay the Master Trust for the administration and the investment vehicle, such OEIC’s (unit trusts) for the investment management.
Packaged arrangements will normally be the most competitive where the provider operates both the QROPS and underlying investments.
For most people if the establishment fees exceed 3% to 4% (that includes the Master trust and initial charges of any collective investments) then take a close look at other arrangements.
Remember the administration of a QROPS in the long run is easier than a UK Personal Pension. Whilst QROPS are a new niche product, you don’t need to accept unrealistic charges.
With living abroad it’s always worth making sure that you have access to free on-line valuations otherwise getting up to date information via the post could be difficult.
The main reasons people consider QROPS are:
• Access to your Pension capital. Up to 40% of your money can be released to you as a loan even before retirement age.
• No restrictions on the level of income at retirement after five full UK tax years of non UK tax residency.
• No requirement to buy an annuity or alternatively secured pension, at any age.
• On death pass the fund intact to spouse and heirs’ UK inheritance tax free.
• No liability to changes in UK Pension taxation or legislation.
To any individual in foreign lands or considering living abroad, these are much more flexible terms than in the UK and we believe without any major negative points.
You will of course be subject to tax in your country of tax residency on income and capital etc. And we ask you seek advice from a tax professional in that jurisdiction.
Full access to your funds;
Undoubtedly you can take all your Pension money as cash but then it has to be placed in a taxable account.
The QROPS is a tax exempt investment so we feel there is little point taking all the money out as you have all the flexibility you need in the QROPS for the rest of life (capital, income and passing funds intact on death to spouse and beneficiaries etc.).
Is a QROPS right for me?
The next stage is to get a letter of authority from you so we can approach your Pension Company for the relevant information about your existing scheme(s).
It is essential that you don’t transfer your pension without being fully informed of all the features and benefits of your existing scheme.
We then compile a full report for you before any advice is implemented. There will be occasions that we advise not to transfer but ultimately the informed choice is yours.
We will also arrange to meet you to go over the advice.
Any questions about Offshore Personal Pensions please call us now on:
+44 (0)1884
860061
for a free informal discussion.
Or email gary.barlow@med-ex.co.uk
with your query or ask us to call you back.