If you follow the news about Qualifying Recognised Overseas Pension Scheme (QROPS), constant speculation about rule changes can make some people believe transferring a pension offshore is overly complicated.
This is not true. Pension savers have to remember that QROPS are not complicated – it’s the jargon and stuffy approach of some of the people that give advice about them that is the real problem.
That’s why we are explaining four myths to make switching a UK pension to a QROPS simpler:
QROPS are tax avoidance scams
QROPS rules that govern how the pensions are run are drawn up by HM Revenue & Customs (HMRC) and The Treasury. Many of the pensions are run by reputable and well-known insurance companies and organisations, such as the European Union.
In the past some QROPS advisers have tried to push the boundaries to gain extra tax advantages for their customers, but HMRC scrutinises the markets for rogue schemes and quickly acts to make sure investor money is protected.
QROPS are difficult to manage
Managing a QROPS is no different to managing a UK pension. The same options are available across the range from fully managed to self-managed schemes.
Any number of UK pensions may be consolidated into a QROPS, providing they are not public sector or civil service schemes.
Moving several pensions into a QROPS can save charges, cuts down on red tape and paperwork and maximises investments by keeping all your retirement savings in one place.
You have to be really rich to start a QROPS
No you don’t. You do not have to have any more cash in your retirement savings than a standard UK pension pot. QROPS rules set no top or bottom limit on the value of funds that can be held in a scheme. However, just like financial firms in the UK, some providers choose to deal with investors who have £100,000 or more to put into their fund.
Some smaller funds may find the set up and running costs are disproportionate to the benefit of having a QROPS.
Around 1,000 different QROPS are on the market and many cater for investors with smaller pots.
Savers are no better off with a QROPS
That depends on the individual. A well-managed QROPS with smart investments is a tax-effective, flexible pension for expats.
Funds have no lifetime allowance limits, like those in the UK. They can be handed down to beneficiaries on death like UK pensions. Payments are available in a range of major currencies, doing away with worries about currency exchange fluctuations for expats.