Pensions transfers for people who are thinking about leaving or have already left the UK are often advised – they can carry huge benefits in terms of tax advantages, relaxed rules, leaving your pension to your heirs and more. However, because the QROPS are all outside of the UK, it can be a murky and confusing world.
One of the first steps that most people take is to go online and do some preliminary research on the internet. This can be a mistake. Much of the information found online was once correct, but has been superseded by more recent legislation, but has been left online. This, combined with more recent articles can only serve to confuse.
One prominent IFA company we spoke to says that a lot of his clients approach the QROPS list on the HMRC website and attempt to contact random QROPS on the list. This can have some amusing consequences.
“The list is meant as an aid to UK pension schemes, it isn’t for public consumption. There are thousands of names on this list – many aren’t QROPS at all, some are but have never accepted a transfer because their home country says they can’t – the USA for example – and almost all the rest are occupational schemes, like the ones run by Google for its employees for example”.
There are a handful of QROPS hiding in the thousands that are suitable as personal pension schemes for transfer but even most of these won’t be suitable for one individual or another because the location of the QROPS isn’t compatible with the location of the client now or where the client plans to be on retirement.
Double taxation treaties must be analysed for pension-income clauses and tax treatment calculated now and predicted for the future. Some QROPS trustees have schemes in multiple jurisdictions and allow free transfers between them – these are obviously favoured for their flexibility.
Reading just the first few lines of the QROPS list on the HMRC website, you can see that this is exactly right. It says, “The list is not to be taken as a recommendation for a particular scheme or product. Nor should it be taken that any scheme featured on the list is approved or backed by HMRC”.
So we asked our IFA source, what use is the HMRC list?
“We use it as a good first step when we begin research on a new scheme for a client. However the only way to be sure about a scheme is for a professional to do proper due diligence and look at a scheme in the light of professional experience. We do the same when we’re looking at a mutual fund to recommend, or a share in a company to buy – there’s no easy list, there’s no substitute for hard work”.