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The pros and cons of Qrops/Qnups for advisers

This article is part of
Guide to Qrops and Qnups

Amin Malik, director of Delta Financial Management, suggests the benefits to advisers include the ability to offer a highly valued and specialist service to specifically meet with certain clients’ needs, circumstances and objectives.

Other advantages, he says, are:

• being able to discuss appropriate solutions for clients and make recommendations that are tax-efficient not only during their lifetime but also in the event of death;

• the opportunity to enhance the advisers’ business proposition, effectively adding another string to their bow;

• generating additional funds under management – because certain individuals may not have to withdraw as much income from Qrops/Qnups as they may not be subject to UK taxes, more funds can remain invested; and

• being able to demonstrate full independence in the post RDR world.

But the drawbacks include the risks for independent advisers around issuing inappropriate advise on this area.

Geraint Davies, managing director of Montfort International, insists there could be unfavourable consequences for independent advisers if they don’t check whether a Qrops might be appropriate for a client.

Mr Davies claims that any advisor will have 20 per cent of their clients who satisfy one or more of the following conditions:

• they might leave the UK;

• they have the rights to citizenship of another country;

• they might live or work outside the UK in the EU;

• they are married to a non-UK national;

• they do not see themselves retiring in the UK;

• they might leave the UK for tax reasons; or

• they were born outside the UK.

He suggests adviser should issue a clause to their clients as the basis of a condition of advice that states the understanding on which the advice to transfer is given and stating that if that changes the client should contact them.

Offering further specifics, Mr Malik offers up some other possible drawbacks:

• HMRC guidance on Qrops/Qnups is not as comprehensive as for a UK registered pension scheme. Advisers can refer to the HMRC Registered Pension Scheme Manuals (RPSM) for guidance on the latter;

• advisers will have to devote additional time and effort to gain sufficient knowledge and expertise;

• restrictions may be imposed by the advisers’ compliance department for advice relating to Qrops/Qnups as advice in this area may be viewed as high-risk and hence unacceptable; and

• additional regulatory and running costs connected to Qrops/Qnups advice. Advisers would have to report or even seek permission from their respective professional indemnity insurer and may incur extra costs for this.