QROPS

QROPS Best Fit

Whatever the size of your retirement budget, it is important to get a pension scheme that will suit your individual needs. If you have decided on a QROPS you have either moved abroad or are about to leave the UK. Either way, when you change your pension plans you have the opportunity to review your entire investment strategy and take advantage of the overseas and perhaps even offshore opportunities that are available to you.

So what criteria can you use to assess the QROPS you have to choose from?

Firstly, consider how a scheme will fit in with your plans for the future. If you need to access a large lump sum to pay off a mortgage or other debts then a scheme that forces you to purchase an annuity at a particular age may not be appropriate.

Similarly, if you have a particular asset that you would like to see transferred into your pension, make sure that your adviser is aware of this and can choose a scheme that both permits that asset class and does not levy charges that are too high.

Your risk profile and the likely length of time before you retire are also relevant. Those with a few decades between the QROPS transfer and retirement may be more prepared to invest in a higher risk product in the hope of a higher return. On the other hand those for whom retirement beckons more urgently may wish to play it safe and choose lower risk products.

Whether tax is the main driver behind your decision to get a QROPS or a secondary consideration, tax efficiency is the key to a financially comfortable retirement. With a QROPS there are potentially two “layers” of tax to take into account. First, there is the jurisdiction where your QROPS is resident. Second, there is the place where you yourself reside. The cumulative effect of both of these layers needs to be taken into account, as the worst case scenario is that you may have to pay tax to two different authorities. However, a well advised QROPS investor will choose a QROPS destination that offers the best tax planning opportunities.

At QROPS.net we appreciate that there is no “one size fits all” solution with overseas pensions. That is why we listen carefully to the needs of each of our clients, and find the right scheme to suit them. In some circumstances we may even able to arrange a bespoke solution.

QROPS

Setting Up A QROPS Step-by-Step

For many British expats living or preparing to live abroad permanently, taking the decision to start a QROPS is easy once the tax benefits are weighed against a standard UK pension scheme.

Although a QROPS – a Qualifying Recognised Offshore Pension Scheme – sounds complicated, the rules are quite straightforward. However we recommend reading as many independent articles as possible to get a solid understanding of how it can help you, read this other QROPS article.

The problems for most people come in picking the right provider in the right tax jurisdiction to maximise the advantages of the pension scheme and applying the rules to make sure they don’t break them and lose the advantages they have planned so hard to gain.

Best advice

However much you think you are a savvy investor, always take best advice about a QROPS from an independent financial advisor experienced in this specialist pension sector.

Transfer funds

Find out the transfer values of your investments from your current pension providers.

Some people have several funds after chopping and changing jobs and maybe setting up their own personal pension. All of these can go in to a QROPS, but any state pension is excluded.

Map out your future

This may be hard, depending on your age and circumstances.

If you are retiring, you probably have a pretty good idea of where you intend to live.

If you are younger and still working, where you want to go to work now may not be where you end up living.

Where you live may affect the tax you pay on income from your QROPS or investments you make from any lump sum you draw down. You do not have to live in the country where your QROPS is set up.

Choose a home for your QROPS

This is where best advice comes in – your financial advisor should be able to tell you which tax jurisdiction and which provider is most suited to your circumstances.

A current favourite is Guernsey, a Brit friendly jurisdiction with stability and low tax rates.

Consider the costs

Your advisor should tell you in advance of making any transfer switch what the likely costs will add up to – they should include his fees, the value of your transfer funds and the fees your current providers are deducting and any set up and ongoing management costs for your QROPS.

These fees will depend on the size of the fund you transfer. A QROPS transfer is generally most cost effective from a fund size of £150,000-£200,000 upwards.

QROPS solutions are available for smaller funds, starting from about £50,000.

Managing your investment

QROPS providers generally have a fund manager, but you can choose to be more hands-on and have more of say about your investments if you wish.

Unlike a UK pension that only allows investment in the London stock market and UK funds in Sterling, with a QROPS, investments are much broader based and are can be made in any currency.

A vehicle can also be set up within the QROPS to buy, manage and sell property.

How long does setting up a QROPS take?

Most transfers take up to 2 to 12 weeks.

Will a QROPS transfer mean an unauthorised payment charge?

Any funds transfer to a QROPS is a recognised transfer and no tax penalty is charged.

Sitting out the 5 year rule

For the first five tax years (April 6 one year to April 5 the following year) from setting up a QROPS, the fund manager must report any drawing of funds to HMRC.

After the end o0f the fifth tax year, this requirement is dropped providing the QROPS scheme member is not UK tax resident for the tax year the payment is made and has not been tax resident in any of the prior five years.

More information

Use this checklist to discuss whether you meet the QROPS criteria with your financial advisor and make sure you go through all the points with him or her to make sure you have all the information you need to make your investment decision.

To get the very best advice we recommend speaking with the industry leaders. The leading company is call Qrops Adviser and can be found by following this link, QROPS. They will help you from start to finish and have offices all over the world.