A Qualifying Recognised Overseas Pensions Scheme is one of the first options to reveal itself when an expatriate starts to research the best way to handle their pension savings, pending a move overseas. Many within the expatriate community already have them, while some considering a future move abroad may be actively looking into taking one out.
However retirement pension planning for those who are intending to live and work overseas is a very complex area and while a Qrops can provide greater flexibility for overseas workers in terms of investment choices and the payment of benefits, some aspects do require far closer examination in order to ensure their total suitability.
By definition a Qrops will not only allow its member to move their UK pension to another country, and in doing so benefit from the tax advantages they can offer, but it will also provide a freedom of movement which will better suit those who may find themselves having to change jurisdictions, sometimes several times throughout their career.
These benefits will see many expatriates having already converted their pension to a Qrops in order to take full advantage of the added flexibility they allow, while many more will doubtlessly be considering doing so especially with the value of the current market now expected to grow from £5bn to £10bn in the next three years.
However, as with many financial products, a one-size-fits-all approach does not exist. A Qrops is not for everyone and people need to be aware that things can, and sometimes do, go wrong.
One of the biggest potential pitfalls from a Qrops can come from exit penalties and transfer fees that can be attached to such a scheme, and which can often be hidden in the small print. Some Qrops providers are not particularly transparent when it comes to stating their transfer fees, and so these can come as a nasty shock should the need to transfer the funds to another jurisdiction arise.
For example, anyone previously in a Guernsey-based Qrops will know all about the need to transfer when such schemes become prohibited, and in the case of Guernsey some of those affected will have already experienced some fairly eye-watering exit and transfer fees.
There are however some providers on the market which do not charge any exit or transfer fees, and in order to locate these specialist assistance and support from an independent expert, such as The Qrops Bureau, is recommended.
Another potential pitfall associated with a Qrops is the commission that is often payable by the investor for the privilege of holding one. Traditionally Qrops have offered pension investors a choice of offshore bonds, however, with the landscape shifting and the relationship between the two now changing as we move more towards a multi-platform offering, the use of an offshore bond can expose the client to two separate layers of charging – one for the top wrap, the Qrops, with a second on the offshore bond itself.
By using a platform these costs can be significantly reduced while still providing the client with exactly the same tax advantages available through a Qrops.