As Qualifying Recognised Overseas Pension Schemes (QROPS) providers offer more than 3,200 pensions across more than 40 financial centres, how do expats choose the place to move their offshore retirement savings?
It’s not easy to compare the QROPS market for the uninitiated.
What looks like an enormous choice when starting the QROPS transfer journey quickly narrows down to a short-list of just a few funds across a handful of financial jurisdictions.
Looking down the QROPS list, many of the schemes are single member pensions or company schemes for employees and former workers.
Stripping these out of the list removes hundreds of schemes.
Then some QROPS are only available to residents – like those in Jersey and Guernsey – which leave them out in the cold if the expat plans to live elsewhere. This reduces the list by a couple of hundred more.
The government in Guernsey is considering a law change to reinstate up to 300 QROPS which were suspended by HM Revenue & Customs in April 2012.
To work out which is the best site for an individual retirement saver, put together a wish-list.
Questions have to be answered like:
- Their appetite for risk
- How the saver wishes to invest and whether the QROPS offers the right options
- Does the saver want the maximum lump sum or a lesser amount?
- Where are they retiring to?
- How do the tax regimes interact in the QROPS host centre and the saver’s retirement destination?
- How much is available to invest? Fund size can rule out some providers or make the transfer unviable.
Many advisers suggest that currently three financial centres are at the vanguard of the QROPS industry – Gibraltar, New Zealand and the Isle of Man.
Each has different QROPS rules and regulations that allow different investments, retirement ages and tax-free lump sum options.
Between them they offer around 300 providers, but this number will soon whittle down to a handful when the retirement saver’s preferences and goals are taken into consideration.
Dark horses also trending in the QROPS market are Malta, Switzerland and Ireland.
Other issues that are often overlooked when choosing a QROPS are whether the financial centre has an independent financial ombudsman and an investment compensation scheme if things should go wrong.
Regulation and consumer protection are just as important as investment returns and tax effectiveness when comparing QROPS pensions.
Whatever the expats reasons for looking to take their pension offshore, working with an experienced and regulated advisor with the resources to properly source providers is vital.