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David Trenner, technical director at Intelligent Pensions, examines the risks to clients of unqualified overseas salesmen.
QROPS have created an opportunity for abuse and mis-selling. There are valid reasons to use a QROPS, but clients need to be aware many QROPS are being sold by advisers who are not regulated and who are taking commissions as high as 8% of the fund.
These commissions for investing the funds within the QROPS in a bond are on top of the set-up charges of the QROPS provider.
QROPS are likely to be particularly attractive to those who have been abroad for more than five years and have no intention of returning to the UK. They have advantages which could include taking a little more than 25% of the fund as tax free cash, as HMRC's requirement is that at least 70% of the fund be used to provide an income.
It has been suggested that New Zealand QROPS could be used to allow 100% of the fund to be taken as tax free cash, although there is concern in New Zealand that this could lead to loss of recognition.
We have already seen QROPS in Singapore and Hong Kong lose their recognised status, and clients need to be sure that if there is a problem with the jurisdiction where their QROPS is based that at least they have some comeback against the financial adviser who sold it to them. Sadly in most cases this will not be so.
Clients with SIPPs and other UK pensions who decide to live abroad can retain their plans and benefit from tax exempt growth, and they will still qualify for 25% of the fund as tax free cash when benefits are drawn.
So in many cases leaving funds in the UK makes a lot of sense. If a client is not sure whether they will remain abroad then it will almost always be best to leave funds in the UK scheme.
My message to UK advisers is you should not assume an overseas QROPS salesman knows more about the scheme, and walk away from expat clients looking to transfer. Not only will you be losing a client, but your client could be losing 10% of his fund in charges and commissions which the overseas salesman does not have to disclose.
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| Comment | QROPS: Not regulated, not registered, just recognised |
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QROPS G60
I think Jane is right. Why dont HMRC make it a requirement that only a G60 qualified adviser can undertake a QROPS transfer. This will remove all the unqualified salesmen leaving only qualified advisers. But as always it will be too little too late. Stable door bolt................
Posted by: Katie jones
QROPS are specifically for people who have left the UK
Am I missing the point but why should QROPS be regulated? They are specifically overseas schemes that are utilised by those who are no longer resident in the UK. Your points on G60 are valid but really most of the advice on whether to do a QROPS is done after a UK resident arrives in another country. People taking advice in the UK are a drop in the ocean and most will do a QROPS because its a better alternative to transferring their UK plan to plan in the country they live in. Rarely would a G60 qualified adviser be qualified to say whether a QROP is a better alternative transferring to a domestic scheme in Spain nor France or wherever. QROPS are not for UK residents so regulation is irrelevant really.
Posted by: Offshore IFA
QROPS needs regulation.
Let us remember what regulation is for. It is to protect clients from abuse, loss, and financial harm. 95% of all so called Offshore IFAs are photocopy salesmen and the like. Pension transfers deal with peoples life savings. An analysis of your existing UK pensions can be quite complicated. So needs to be undertaken by a qualified advisor. An unqualified advisor can wreck people’s lives. G60 is important as it guarantees that you are talking to a financial adviser who knows how UK pension legislation works. And its effect on a transfer decision. Without G60 you are likely to be entrusting your life savings to a car salesman/Offshore IFA. Or a UK FSA registered IFA, who only ever undertakes mortgage business. Get this right only use a G60 qualified IFA whether UK or Offshore. Just Google: QROPS G60 This should point you in the right direction.
Posted by: Steve Martin
QROPS G60
I was about to transfer my UK pensions to a QROPS. But having started to take an interest in the subject, came across this article. This was the first I had heard about G60. I then sought advice from an IFA who offers G60 advice on QROPS transfers. What a difference in service, I saw. The IFA undertook a Transfer value Analysis calculation for each of my five pensions. From this it was clear that only four of my UK pensions should be transferred as one had many guarantees that could not be matched by a QROPS. The original adviser had just recommended a QROPS transfer on the fact that I had been out of the UK for over five tax years. Take note G60 guarantees that your adviser is qualified to advise on a UK pension transfer. You can check if your adviser is CII qualified here: http://www.cii.co.uk/app/membersearch/MemberSearch.aspx
Posted by: Gareth Thomas
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QROPS advice
I agree with your article. You must ensure that your adviser is qualified. Most are not. This includes most UK FSA regulated IFAs. The qualification required is UK CII G60 If you Google for this you will come across http://www.pension-transfers-qrops.com/ They have a very good reputation and the advisers on QROPS are G60 qualified. They are mentioned on lots of forums all good no bad. One of the directors of the company is calling for HMRC to make G60 advisers the only route for transfers. As this will remove all the cowboys from the market. This makes sence to me.
Posted by: Jane Thomas