Lots of people dream of moving overseas to enjoy their retirement in the sun. However, there’s always the question of what they should do with their pension. QROPS pension transfers are often advertised as the solution to this issue, however, in our experience many people end up worse off than if they’d stuck with their UK pensions. The UK financial market is, after all, one of the most regulated and consequently the safest in the world.
What’s a QROPS pension transfer?
QROPS or the “Qualified Recognised Overseas Pension Scheme” was introduced by HM Revenue and Customs (HMRC) in 2006 to help Britons who’ve moved abroad permanently take their UK pension funds with them.
QROPS are overseas pension schemes that HMRC has identified as meeting a minimum set of standards in terms of security and regulations. This does not, however, guarantee that they are the best choice for everyone.
While originally intended to be a means by which UK retirees moving abroad could keep their financial affairs simple, they have been marketed by unscrupulous firms as a way to avoid UK tax and get early access to tax-relieved funds. For some, this has had dire consequences with unwelcome tax bills and sometimes entire pension pots being lost.
The tax free myth
It’s true that once your money has been transferred from your UK pension schemes and into a QROPS it’s no longer subject to UK tax. However, these funds will likely be liable for tax in your new country of residence – and this may be more or less favourable than the UK, depending on where you live.
It’s also true that EU residents can move their UK pensions to a QROPS within the EU/EEA without incurring tax on the transfer, although this is likely to change after Brexit. Those moving their pensions to a QROPS outwith the EU/EEA, however, will be liable for 25% tax on their transfer which in some cases could be a hefty sum of money.
The false benefits of early access
Another “selling point” of QROPS is that many of them are more flexible than UK pension schemes, allowing individuals to withdraw cash as and when they like.
As with Self Invested Personal Pensions (SIPPs), this freedom may come with certain advantages but there is also the risk of prematurely exhausting your funds, leaving you and your loved ones in an extremely precarious financial situation.
Unreliable, unsolicited advice
The reality is that keeping your money in a UK pension scheme even if you live abroad is, in the majority of cases, the best option. The Financial Conduct Authority’s advice is that consumers should be highly suspicious of unsolicited contact from firms and advisors promising otherwise. Many of these firms are not regulated in the UK, meaning that if something does go wrong there is often no grounds to recover your money.
If you’ve lost money transferring your UK pensions to a QROPS as a result of bad advice, our team at Beat the Banks are here to help. We know it’s not right that well-meaning pension holders have been led astray and we’re determined to work with you to find a solution. Give us a call on 0800 193 1234 to discuss your case with one of our specialists.