A Qualifying Recognised Overseas Pension Scheme (QROPS) is a pension scheme designed for expatriates and usually advised on by qualified advisers in the jurisdiction in which the expat lives.
However, not to be silenced, old-school UK-based advisers whose experiences of the benefits of such a scheme are perhaps limited at best, seem particularly – and somewhat bewilderingly – keen on making sure their views are heard.
In light of the recent announcements that public sector pensions are set to be locked into the UK for good as of April 2015, QROPS advisers overseas have witnessed a huge influx in enquiries as those this affects assess their options before options are limited. A group of UK IFA’s are currently warning against the transfer to QROPS for public pension scheme holders – citing foreign advisers who are apparently simply chasing commission – without assessing the benefits for the respective client.
No Commission in the UK
UK advisers are no longer allowed to take commission on products they offer their clients, under new regulations introduced to try and create an amount of transparency in an industry the public historically take a particularly dim view of. They now generally set out an agreement where they charge for their advice, but if it’s advice on QROPS, how much is this “advice” worth?
Of course a QROPS transfer may not be the right way to go for everyone, and a QROPS transfer must be considered and advised upon on a case-by-case basis. Often public sector schemes will offer a host of benefits unable to be matched by a QROPS, but many benefits are only relevant if you reside in the UK, and as a few “commentators” have perhaps forgotten, a QROPS should only be entertained as an idea if the pension holder intends to live away from the UK permanently.
Unfortunately within the UK, IFA’s have a habitual tendency to
a) dismiss ideas which are not in line with their own way of thinking
b) to allow fear of a new product and a lack of understanding to impact their view.
It’s these out dated viewpoints which have sadly tarnished the reputation of what should be a noble profession, but as the new breed of open-minded and knowledgeable generations come to the fore, it is hoped that the industry can regain some credibility moving forward.
Putting the general reputation of UK IFA’s to one side momentarily, when it comes to QROPS, it is widely acknowledged that the constantly-changing rules and the initial teething problems brought on by a few questionable jurisdictions (Singapore and Guernsey, who have both since been struck off the HMRC Qualifying list), have created a fear of QROPS amongst IFA’s – who in every case of a client stating their intention to move permanently away from the UK, simply must offer QROPS as an option to consider.
Due to a lack of understanding initially, many UK-based advisors offered QROPS to their clients despite their intention to only live overseas for a few years. This created serious problems as the scheme is unsuitable for this arrangement, and severe fees are incurred upon repatriation of funds.
A lack of knowledge in the UK on QROPS still exists, and as each case is so specific and relies on the nature, size and benefits offered by the UK –based fund, the jurisdiction in which the client lives, and the jurisdiction they intend to retire to as a fundamental starting place for advice, knowledge is borne out of experience and the majority of the UK’s IFA’s have limited QROPS understanding.
As QROPS are still a relatively new product – they were introduced in 2006 – there are a lot of areas UK IFA’s may not quite be familiar with, but they are being urged by the QROPS Bureau based in the UK to familiarise themselves properly with the product to help any clients considering leaving the UK to get the full picture.
Wariness should be paid to anyone generalising to the extent of publicising warnings against transfers into QROPS. It is not known exactly what the agenda behind these statements is, however each transfer case is individual and no credible advisor should give advice without considering the individual’s own circumstances.