Switching to a Qualifying Recognised Overseas Pension Schemes (QROPS) now clearly involves a risk assessment squarely resting with retirement savers.
Making a QROPS transfer without extensive due diligence involving a battery of specialist advisers is the way forward now HM Revenue & Customs has published updated guidance following the Singapore Rosiip QROPS debacle in the High Court.
The judge branded HMRC’s approach to QROPS transfers as ‘scandalous’ and ‘grossly unfair’.
He was referring to retrospective tax assessments delivered to QROPS pension savers threatening to take 55% or more of their pension funds for switching to the Singapore QROPS which was later found to breach the qualifying rules for the offshore scheme.
Nevertheless, the court has so far decided not to publish any judgment relating to the five-day hearing in London earlier this year.
HMRC’s response was a tax amnesty for Singapore QROPS investors – but the door is still open for retrospective tax action against anyone who has invested in a QROPS that is suspended for breaking pension and tax rules after September 2008.
The message to current and would-be QROPS investors is straightforward.
If you want to transfer any onshore pension funds to a QROPS or from one QROPS to another, then carry out due diligence to ensure the scheme is set up within the rules.
The best way of doing this is to take top-notch advice from an experienced financial team with the skills and resources to undertake the necessary due diligence.
This may mean adding a significant cost to the pension transfer, but in the long term, the extra expense should be worthwhile as the action should negate any risk of HMRC looking to skim a huge slice of retirement savings in the future.
All QROPS are based on the same pension blueprint offered by HMRC, so checking the reliability of the scheme should be a tick the box exercise for the right advisor.
HMRC will not indemnify retirement savers for making mistakes, so always look for a regulated independent financial advisor who deals with the whole-of-the-market and has no links to specific financial jurisdictions or providers.
This reduces the chances of buying into a turkey.
With a one-man band or unregulated advisor, the risk is not having any recourse to an ombudsman or compensation scheme if things go wrong.
So much money is at stake in a QROPS transfer that even spending 10% of the fund value on due diligence is much cheaper than paying fines and penalties for making a wrong decision.