If you are an expat or international worker with UK pension rights, the chances are that you have received duff offshore pension advice from a British-based financial adviser.
Even HM Revenue & Customs (HMRC) is unsure whether British residents can move their pension funds into a Qualifying Recognised Overseas Pension Schemes (QROPS).
The Financial Conduct Authority – the UK’s pension advice regulator – has already warned advisers that they should include information about QROPS when discussing retirement options with clients.
But QROPS advice seems to be a black hole for many – as highlighted by a case currently before the Financial Ombudsman ordering a financial adviser to pay compensation to a client because the option to switch a UK pension to a QROPS was not mentioned in advice to someone intending to move overseas.
So who should be asking for advice about QROPS?
Advice black hole
The list is quite long and many financial firm clients probably do not even know what a QROPS is and whether it’s an option for them.
Some consumers who should know about QROPS when making financial decisions are:
International workers who have spent time in the UK and built up an onshore pension fund, but now intend to move to another country permanently
Any UK resident thinking about becoming an expat
Anyone living in the UK holding a dual passport or married to a foreign national
HM Revenue and Customs said: “There is no definitive answer on who should have advice or who can put funds into a QROPS. The rules are designed to help people to take their pension savings with them when they leave the UK.
Unclear rules
“The Registered Pension Schemes Manual relating to member requirements for QROPS does not state that they must live outside the UK.
“However, most do, which is what we would expect. Where the retirement saver lives in the UK, tax charges apply to payments made out of their transferred pension savings as if they were payments made out of a UK registered scheme.”
The specific rule says that if the individual is UK resident when the transfer is made to a QROPS, or was resident in the UK in that tax year or in any of the previous five tax years, the transfer fund will be subject to an unauthorised transfer charge starting at 55% of the transfer fund value.