QROPS can be beneficial in the correct circumstances though due to bad or mis-informed advice it is possible that they may end up being a costly mistake.
To ensure you are not on the end of a QROPS mis-selling scandal it is important to be fully informed. Take these steps to establish whether a QROPS pension transfer is the right option for you;
Although QROPS are taxed less this will not apply in these cases as they will be treated as a UK based pension scheme.
Other QROPS drawbacks include their costs. These can be in excess of UK registered pension schemes (RPS). For this reason it is important to weigh up their benefits against their costs & drawbacks to ensure that a QROPS pension transfer is the right option for you
- Find full information on your current pension. This will allow you to know what guarantees and benefits you are giving up to enable a fair comparison to be made.
- QROPS must follow HMRC rules. If there can be any doubt as to the application of a rule always work on the cautious side. For example, under the rules’ prior wording it was technically possible to access your pension before the UK minimum retirement age. This loophole has subsequently been closed.
- A QROPS lack of reporting requirement should not be used as a way of avoiding HMRC’s rules. Failure to adhere to this may result in you receiving an unauthorised payment charge.
- The HMRC QROPS list has never confirmed that a pension scheme is qualified with the latest iterations clearly warning of this fact. It is therefore prudent to consider these key points for selecting the best QROPS provider and jurisdiction.
- Always be aware that QROPS are not right for everyone.
- If you are considering transferring a defined benefit (final salary) pension a Transfer Value Analysis (TVA) report, which compares the benefits foregone with those offered by a defined contribution scheme, must be done.
- If you are in doubt then you may wish to consult a specialist. Not all financial advisers are informed sufficiently to deal with a QROPS transfer.
- If it is established that a QROPS is in your interests then proceed. It is easy to delay or not even make a decision which can lead to you losing out.