QROPS

[dsmitt7]

QROPS (for non residents) allow you to move your Pension Fund/SIPP overseas and avoid 55% inheritance tax. Any experience in this area, specially if you can manage the investment yourself instead of an expensive Fund manager? Is there a way to have access to 100% of the fund instead of the yearly GAD (about 6% pa for a 65 year old)?

[Gust factors]

I have a little experience dealing with these about 5 years ago. It very much depends where you are moving to, eg in OZ (from memory) the benefits are pretty much tax free. I have a contact who deals with QROPS on a full time basis if you want to get in touch with her.

As for the UK, after the 25% PCLS (tax free cash in old money), in capped drawdown you are limited to 120% of GAD. In Flexible DD income is not restricted and you can deplete the fund and as you wish, but to enable you to use Flexible DD your guaranteed income needs to be in excess £20,000 pa. Any income taken from either arrangement will be taxable at your highest marginal rate. eg 20/40%


The Minimum Income Requirement (MIR) will involve an individual demonstrating a sufficient level of secure income.

This secure income must:


Be in payment – i.e. it is not an entitlement to future benefits,
Be guaranteed for life,
Be at least £20000 per annum gross


An individual’s State Pension and State Second Pension (S2P) will count towards the Minimum Income Requirement (MIR), as will income from final salary pension schemes and lifetime annuities already in payment.


In terms of IHT, the money (not spent) will form part of your estate on death and be subject to 40% tax, after application of the NIL rate band. Therefore you have to do something with the cash/income, otherwise it is potentially liable to both income tax then IHT.



Please bear in mind that if in DD when death occurs the pension can continue paying out to a spouse/dependent (s) as before. The 55% tax only applies if your beneficiaries want the cash.


hope that helps.

[dsmitt7]

many thanks
would appreciate that contact please

[industry insider]

I have lived in Oz for many years. In 2008 I transferred an old UK company pension for an agreed lump sum value to Oz. It had to go into a QROPS scheme. I believe the UK law is that it has to remain there for 5 years. On the 5th anniversary, I transferred the QROPS funds legally into my self managed Australian Superannuation fund.

I found some good advice on the web which saved me employing a lawyer, it's quite an arcane area of expertise it seems.

Good luck

[dsmitt7]

is there a way (after 5 years of being non resident) of taking all the money in a lump sum? like the 25% initial lump sum when you start the income draw down?

[MG23]

I believe the UK law is that it has to remain there for 5 years.

That changed recently. I believe it's now ten years after transferring the money, rather than five years after becoming non-resident?

The lady transferring mine did explain it all, but I didn't listen that closely because I had no intention of taking any out in less than ten years anyway :);

[Landflap]

dssmtt7 ; tread carefully. Indeed, all, tread carefully. If we are discussing taking pension fund out of the UK then UK tax laws & pension rules apply. Be VERY careful with QROPS firms. They promise all sorts of goodies but you might fly in the face of UK Tax & Pension legislation.

I took my 25%. I then wanted to raid my fund further & a QROPS firm suggested signing up with them, transferring the remainder of the fund off shore to Isle of Man & thereby giving the Qrops firm total control & giving me what I liked. I nearly signed up but investigating carefully, it appeared that releasing more funds into my hands would be in the form of a LOAN but because the QROPS guys would be investing my money in places of their choice (first amber caution light came on) and interest would be so fantastic, my loan would be paid off at the end of term & I would make more money in the long term (Master Red came on) ! OK , final killer was my trusted Financial Adviser who alerted me to the possibility of the UK Tax & Pension Regulators coming after me for breaking UK rules which, broadly speaking, limit you to 25% of your fund in cash & then an annuity or draw-down scheme to be followed. They, of course, see this QROPS scheming as tax avoidance measures. So, be careful.

[future G-V driver]

Hi, yes there are some issues, but if you live offshore from the UK (I am in Qatar) and you DYOR, you can save a lot of fee's. I arranged the whole Trxf from my UK SIPP to a QROP, I completed all the paperwork, it took 3 hours, the whole thing cost £1500, and about 6 weeks. A lot of Co will tell you you require Specialist advice, and charge a fortune, often based on a % of the trxfrd funds. One Co quoted £65k !!!

I now have my QROP, I manage the money, it is in a safe tax haven and I control my financial destiny, annual fee is £1250

I txfrd under the old rules, so after 5 years and a day, no further reports are required by HMRC. But you are still bound by HMRC rules regarding 25% or possibly 30% lump sum and GAD rates, which are reviewed every 3 years once in D.D.

I also control day to day investment, averaging 23% pa over the last 5 years, I have arranged massively reduced fees with a UK based Stockbroker (yet still thru my QROP a/c)

All in all, the best financial decision I have ever made. Good luck.

[ablb]

As I'm intending on moving my Pension Scheme to a QROPS, I am curious to learn who you are using as your UK stockbroker. My broker says he can't retain my portfolio if I move to a QROPS.

Ta v much in advance.

[merlotsgood]

When can I get a reliable QROPS provider?

[Landflap]

Merlot ; do you really mean 'when' ? I suspect you mean where. Then you add 'reliable' ! Cripes, it's a minefield out there with lots of bods after your pension fund. Anyway, unable to answr any of your questions but glad that I stayed well clear of QROPS.

[Shanwick Shanwick]

I'm going through the process at the moment. I've had the usual Skandia/Generali Offshore Bond proposals which pay healthy commissions back to the advisor and I have a meeting this week with a chap who is happy to do an Execution Only deal with a trustee of my choice. I won't be giving him a % of my pension for completing some forms.

I'll let you know the outcome.

[Shanwick Shanwick]

Well the meeting last week was a complete waste of time. Whilst he made the right noises on the telephone his Company's policy is to always use on offshore bond wrapper provided by that largest commission payer in the market, Generali. The other big bond providers, Friends Provident, Royal Skandia, Royal London etc are all in the same league and shouldn't be touched with the proverbial barge pole.

I've gleaned another nugget in that any IFA operating outside the UK is not bound by the rules of the Financial Services Authority and is not required to recommend the best product for the client. Buyer Beware!

Next meeting tomorrow with an IFA based in the UK.

[4468]

Recently had an excellent briefing from a gent called Jamie Lewington. (Google is your friend!) He does a HUGE amount of work with BA pilots, and is an expert in QROPS.

[Shanwick Shanwick]

Another chap in the St James Place "Sales Department" taking HUGE amounts of cash from BA pilots providing a less than active pension management service with mediocre returns.

Might be worth picking his brain on the QROPS front though.

The meeting I have tomorrow is with a now independent IFA who, in his former life, worked for HMRC in the QROPS department. He remains part of their advisory team so I'm hoping to get it from the "Horses Mouth" as it were.

[NOT ORANGE]

I set up a QROPS 3 years ago in Hong Kong with Friends Provident International.I started with 98k pounds and now it is worth 61k!I still have 2 more years of fees to pay.Worst financial decision I ever made..be careful there are sharks out there.

[Capt Chambo]

Anyone prepared to share experience of a Financial Advisor, or organisation in Australia that is "au fait" with QROPs. Either good or bad!

PMs would be fine.

[Shanwick Shanwick]

NOT ORANGE

Friends Provident are known culprits and the third-party advisor you used will be enjoying the profits paid by your scheme until either you move it, retire or the fund becomes worthless.

It sounds like your fund has been managed in the usual un-managed way. On initial entry your fund would be over-diversified so that you will neither lose too much nor gain too much. Managers do this so that they don't need to look at it too often. A real manager may cost you a little more but should have your fund invested where it can benefit from growth, set stop losses and move it when other sectors become more profitable.

The charges made by the Bond Wrapper have overtaken any gains.

DSMITT7

I have a chap in mind who might be able to help. He specialises in QROPS schemes in Oz and NZ. PM me for further information

[Bengerman]

Shanwick, you said:

Another chap in the St James Place "Sales Department" taking HUGE amounts of cash from BA pilots providing a less than active pension management service with mediocre returns.

Genuine question, what sort of cost do you think should be involved if someone looks after the pension of one who is not too financially savvy and who does not have the time to be hands on and able to look after it themselves?

[Man Flex 37.5]

Has anyone used PIC in Dubai, i think they are part of De Veres?

Cheers

[Shanwick Shanwick]

Man Flex

Do a search for De Veers on ANY financial forum then buy me a pint!

Bengerman

If a manager ACTIVELY manages a personal pension and outperforms the market I think they're worth every penny. One who simply spreads the cash over 20/30 funds and does nothing for 12 months or more has earned an initial fee but nothing more.

Keep in mind that a simple UK tracker fund with an annual charge of 0.15% would have returned over 20% for the FTSE 100 or 30% for the FTSE 250. How does that compare to SJP?

There's no reason that you couldn't put a smaller amount of your pension into the hands of SJP and simply mirror their fund choices in a low cost platform such as Cavendish, Interactive Investor, Alliance Trust etc. I would suggest you would leave out the under-performing funds though.

[Enecosse]

I shifted my pensions offshore a little while ago. I have no regrets in doing so, the benefits make it worthwhile for me.
Anyone who has moved offshore and has any interest in financial matters should take a close look.

There is a potential problem that is not obvious when you first start looking at the QROPS and is certainly not pointed out by whoever is looking for your business and it is this.

Most financial products are front end loaded. If you take out a loan in the UK it will be front end loaded. What this means, excuse me if you know, is that all the charges are taken at the start which ensures that the companies/banks get their money at the beginning of the arrangement.

Now when you start a QROPS the salesman (FA) of the financial company (such as DeVeres) will want to sell you a product or products that pay commission such as structured notes, bonds etc. these are front end loaded. They want to sell you this stuff on an ongoing basis to generate ongoing commission. That's how they earn a crust so it's fair enough.

However anyone who is at all savvy about financial matters knows that keeping cost down is critical so there is an inherent conflict between customer and adviser.

If you decide that you want to do your own investing, buying and selling shares within your QROPS (one of the benefits) there is no commission for the FA, there very quickly follows a lack of interest. So you need to know that the FA will be happy with this before setting up the QROPS with him, and you need to consider what would happen if he retired, moved company etc.

[Shanwick Shanwick]

This makes interesting reading:

http://www.expatmoneyexpert.com/wp-content/uploads/2013/06/eme_lumpsum.pdf

[dsmitt7]

if you can take out 100% of your fund in a SIPP albeit taxed at your marginal tax rate what stops you from taking out 100% in a QROPS and taxed at 0% (marginal rate)?

[Shanwick Shanwick]

Your trustee will not allow it

[dsmitt7]

but if you were a UK resident you would be able to take it all (albeit taxed at marginal rate), so that is discrimination against QROPS, innit?

[dsmitt7]

does anybody know of a UK based fund platform that accepts QROPS investments?

[dsmitt7]

heard of "open architecture" funds platform, does anybody know anything about this and which ones allow QROPS ?
cheers

[Shanwick Shanwick]

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