Based on the latest HMRC QROPS list there are over 3,700 providers covering 45 jurisdictions. This abundance of choice can make selecting the best QROPS provider a difficult and time consuming process. So how do you go about it? In what follows we will consider the whole selection process…
- Are QROPS the right option
- Points to remember
- HMRC’s QROPS list
- Selecting the best QROPS jurisdictions
- Selecting the best QROPS providers
Having established that moving your pension into a QROPS structure is the right course of action for you the next stage is to select the best QROPS jurisdiction. There are, however, points that you should bear in mind when you are going through the selection process.
- There may not be one best QROPS provider but a selection that are equally suited to your requirements
- A pension plan appearing on HMRC’s list does not guarantee that it is qualifying
- Transferring to a non qualifying pension could result in a charge of up to 55%
- QROPS charging structures tend to suit larger pension transfers therefore they may be economically unviable for smaller pensions
- If you continue to contribute to your UK pension then any transfer is probably not in your interest at this point in time. Certain tax implications, including breaching your lifetime allowance (LTA), could however make it worthwhile. If in doubt, contact a specialist regarding the matter
To compile your own personal list it is probably best to consider jurisdictions first and then providers as this could narrow the field more quickly for you
- Do you intend on retiring to the UK or not
- If you are planning on retiring outside the UK where do you see yourself living
- What are the tax rules of the country in question
In most cases your pension should be able to grow tax free. Then, if you decide to return to the UK, you can take advantage of the reduced tax rate applicable to qualifying overseas pensions.
Other considerations that can help you select the top QROPS destination for you include;
- Minimise tax burden – if a jurisdiction applies tax ensure that it has a Double Taxation Agreement (DTA) with your retirement destination. This prevents you from paying more tax than is strictly necessary. Confirm all tax rates that you may be liable for
- Security – Is the industry regulated and is there a financial ombudsman? How stable is the country? Is there any financial, political, or economic risk?
- Protection – Does a financial compensation scheme exist to cover investors in the event of a financial institution failing? How well funded is the scheme and what level of cover is offered?
- What is the maximum tax free pension commencement lump sum (PCLS) allowed?
- Accessibility – You should not be allowed to access your pension prior to the UK minimum retirement age however, some jurisdictions will give you fully flexible access. If having unrestricted access to your funds on retirement is important ensure the country in question provides this facility since not all do
- Security of being monitored by an appropriate regulatory regime if applicable
- Protection via membership of a suitable financial compensation scheme
- Non restricted investment options – if a restriction is in place query why. It could be implemented to protect investors
- Competitive charging structure
- Ability to transfer a QROPS free of charge between jurisdictions if required
- Segregated pension assets
- Efficient administration
- A secure, longstanding business model
Lastly, and critically, confirm that the QROPS provider is currently qualifying under HMRC’s rules and that there is no reason for that to change