Fresh questions raised over Qrops advice after Fos ruling

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Fresh questions have been raised over the rules for advisers in relation to clients that are emigrating from the UK, following a recent Financial Ombudsman Service ruling against an adviser in part over a failure to advise on overseas pension schemes.

David Erhardt of specialist website YourQrops said he was aware of a recent ruling in which the ombudsman ordered an adviser to pay compensation because he did not give his client the option to transfer to a qualifying registered overseas pension scheme, or that he would no longer be able to provide ongoing advice.

The ruling was made by an adjudicator with an ombudsman final decision yet to be handed down.

Two Qrops specialists told FTAdviser the case emphasises the need for advisers to consider overseas pensions for more clients, although they had differing views on whether this only applies to those that are leaving the UK in the near term.

Geraint Davies, managing director of Montfort International, previously told FTAdviser that clients potentially suitable for a Qrops included anyone holding more than one passport, who is a non-UK national, who thinks they might move to another country or at least not retire in the UK, or who is married to a non-UK national.

He said: “Since August 2005 Qrops has been an option so every financial adviser in the UK should have considered it for every single pension advice given.”

Steve Whittam, managing director and IFA at Gibraltor-based Strategic Wealth, agreed that pension advisers whether independent or restricted need to be “Qrops aware”, but only for clients that might be intending to move out of the country.

He said: “Any adviser who gives pension advice to a client and then they move abroad must consider Qrops. If someone even has the intention to move abroad it might be prudent that they consult them with regards to a Qrops rather than a UK-based scheme.”

Mr Whittam added that every adviser practice “probably has a client that has or will be moving abroad”.

Last year, the Financial Services Authority confirmed to FTAdviser that some Qrops may fall under the Retail Distribution Review definition of retail investment products - and that where they do IFAs would have to consider them for clients.

At the latter end of last year, HM Revenue and Customs published its definitive take on Qrops, after losing a case which prevented it from seizing 55 per cent of investors’ savings, which they had transferred to a Singapore-based Qrops called Rosiip in 2006 and 2007 and that was subsequently removed from HMRC’s list.

However, it is still unclear whether UK residents who have no intention of leaving the country are in fact able to transfer their pension to a Qrops.

A spokesperson for HM Revenue and Customs, said: “There is no definitive answer on this; however the regime is intended to enable people to take their pension savings with them when they leave the UK.

“In the section of the Registered Pension Schemes Manual relating to member requirements for Qrops, this does not state that they need to be resident outside the UK.

“However, in most cases they are, which is what we would expect. Where the individual is UK resident there are UK tax charges that apply to payments made out of their transferred pension savings as if they were payments made out of a UK registered scheme.”

Mr Whittam said: “A prime example of what would happen in a major event is: someone moved away with a £1m pot, occupational scheme, and they die and there is a 55 per cent death duty when they start to go into drawdown.

“That 55 per cent death duty is basically the liability of the IFA if they haven’t done it properly. So all of a sudden, he has a bill of £550,000 plus possibly a fine.

“There is a complete blankness on Qrops. All UK nationals have the right to live in Europe so should they keep [their pensions] in the UK or take them out? Advisers need to weigh all the options up.”

Mr Erhardt of YourQrops said he has seen a lot of demand from advisers downloading their Qrops guide.

“When advising clients all options need to be considered. When the client is moving overseas and has a UK pension scheme, a Qrops should be a serious consideration.

“Failing to consider this product may mean that your client could miss out on the substantial benefits that a Qrops can provide, which may lead to them complaining that they had not been fully advised.”