Those people who have a UK private or company pension and are resident outside of the UK, more often than not have the choice to transfer their pension to a QROPS (Qualifying Recognised Overseas Pension Scheme), that is the process of moving your pension outside of the UK. However, what are the important points to note with this, how does it differ from having your pension in the UK and most importantly, does it actually work effectively?
For just over 10 years you have been able to move your pension outside of the UK. Over that time, I have seen mixed success at doing this, with the companies providing this service changing, fees in essence reducing and the options of managing this growing. What has also changed is the benefit of doing this, alongside the advice you receive. Unfortunately, I have come across many cases where this has not worked well, and the reasons are nearly all the same: bad advice was given by the financial adviser who put their clients is funds/pensions that were overpriced and expensive.
To summarise, the current key potential benefits of Qrops would be the first step to seeing if this could be the right choice for you:
- Pension potentially outside of future UK law changes
- Brexit and the impact it would have on being a British person living in Spain
- Potentially side stepping an expected 25% tax charge for moving pensions after Brexit
- Currency fluctuation (ability to change your pension to euros when convenient)
- Portability – the ability to move your pension in the future if needed
- Potentially reduced tax liability
- Inheritance – potential reduction of tax to beneficiaries or potentially lower tax on death (depending on your country of residence)
- Peace of mind
- Closer personal management of your pension
- Tax efficient (working alongside a local tax adviser) potentially
And what are the key points that might mean Qrops is not right for you:
- Returning to live permanently in the UK in the next five years (or maybe longer)
- Pensions total value under £60,000 (the charges would be, in my opinion, punitive)
- A company scheme where the benefits outweigh transferring
- In the near future, wanting to take most of the money from your pension
- Not having your pension in a Qrops managed well and expensively
From the perspective of access to your money, there is currently not much difference to having a personal pension in the UK or a Qrops. With the rule changes a few years back, you can, in essence, get access to your UK pension from age 55 in the UK and as much as you like, just as in Qrops.
Where Qrops really can help is moving an asset away from the UK and any potential rule changes, which have been regular over the recent years (mainly worse for the person owning a private pension). Couple that with Brexit and a potential 25% tax charge, then having your pension outside the UK will give you peace of mind in knowing exactly what the pensions rules would be for you moving forward. Also, given the fact that if you did ever move back to the UK (statistics show that for a British couple, there is a 75% chance one of you will go back at some point), you can transfer it back with you (there could also be tax benefits of doing this) and with some pension companies no charge.
However, perhaps the most important question is, does it work? The simple answer is yes it can, BUT it has to be set up the right way, with the right company and if you are given the right advice for what your pension is invested in. Basically, it needs to be done for your benefit, not so that the adviser can earn as much commission as possible from your pension.
Whenever I take a new client on, I always ask them if they would like to speak to an existing client to see what their experiences were, which is what I would do when performing my own due diligence.
If you would like to talk through any pensions you have and what your options are, feel free to get in touch and know that you will be given good advice, whether you become a client or not.
G transferred her pension 4 years ago; it has grown significantly over that time. “Chris has always been consultative and there when we need him.”
J transferred his pension 6 years ago. “It has grown well over that time. Whenever I have needed money from my pension Chris has arranged this for me. I would recommend him for sure.”
C transferred her pension 5 years ago. “It has grown steadily in that time (I am a cautious investor) and since then my husband and I have asked Chris to help us with our other investments.”