Expats wrestling with ways to increase their pension income often ask whether switching their UK pension to a Qualifying Recognised Overseas Pension Schemes (QROPS) will give them more money.
Disappointingly, the answer for most is ‘unlikely’ because they have already bought an annuity, are drawing from a final salary pension or have a workplace scheme with extra benefits that a QROPS cannot cover.
That doesn’t stop thousands of expats explore the option – generally as the result of a cold call letter, email or phone call from an unregulated salesman.
If an expat or international worker wants to transfer their UK pension to a QROPS, they need to protect their interest by working with a regulated financial adviser who has a background in successful QROPS transfers.
Generally, a one-man band looking cold calling for customers will not have the experience and resources to organise a tailor-made QROPS transfer.
Expat pension option
So, having established a QROPS is not suitable for every retirement saver, the pension is an option for a huge swathe of the expat market.
What a QROPS offers is a better underlying investment choice that can build a larger fund – and that’s how a QROPS can pay an extra income.
But before diving in, ask a financial adviser for a cost-benefits analysis, because switching to a QROPS will involve losing some money when the transfer value is calculated, especially if the current scheme comes with a final bonus.
Then make sure the adviser fully lists any one-off set-up costs and ongoing administration and fund charges.
Any good financial advisor can source a ‘whole of the market’ QROPS, so can tailor a short-list of suitable pensions from the 3,323 available from across 42 global financial centres.
Questions to ask
Watch out for salesman steering the options towards particular providers or jurisdictions, because they may not have their customer’s best interests in mind.
Some questions to consider when transferring to a QROPS include:
- Where will you be tax resident as an expat?
- Fund size – is the cost of transferring worthwhile and will you fund breach the new lifetime allowance cap of £1.25 million?
- What will happen to your pension if you move countries?
QROPS are a flexible saving option that around 10,000 expats select every year as a solution for their retirement finances, according to the latest figures from HM Revenue & Customs (HMRC).