One of the biggest grey areas about going to live abroad is what you should be doing with any UK based finances you might have, such as your private pension. Many people tend to "play safe" and leave them intact in the UK, drawing them from their UK current bank accounts as and when applicable. But, is that the wisest thing to do? Are you making your money work for you in the best possible way?
Exactly what are QROPS?
QROPS is an abbreviated term which stands for "Qualifying Recognised Overseas Pension Schemes". Put in simple terms, they are the mechanisms by which you can move any money you have that is set aside in your private pension fund, to another country.
But are they safe, or are they some kind of scam?
QROPS are Bona Fide Mechanisms
QROPS are not scams. They are legitimate mechanisms that are actually recognised by Her Majesty's Revenue and Customs (HMRC). In actual fact, if you go to the HMRC website, you'll find a listing of schemes that meets with HMRC's conditions.
What Sort of Pensions can be Transferred to QROPS?
In the main it's only private pensions that can be transferred into a QROPS. Basic state pensions, and state second pensions (if you are entitled to them), do not apply. They have to remain where they are under UK jurisdiction.
If you have what is termed as a final salary pension, (like a Civil Service pension such as the NHS superannuation scheme), then you probably wouldn't find any benefit in transferring it into a QROPS.
However, anyone with a private fund, such as a self invested pension, or a personal pension scheme, would in all likelihood benefit from going down the QROPS route.
The Benefits of a QROPS
There are several benefits that can be achieved by transferring your pension fund into a QROPS. They include:
- Not having to purchase an annuity
- Avoiding UK taxation on pensions
- Passing unspent funds on to your heirs
- Avoiding the fluctuations of foreign currency exchange
The Disadvantages of a QROPS
- Legal set-up fees and administration fees
- Possible investment risk
- Possible protection and/or compensation downside
How to Minimise Risk
There is always a certain amount of risk when you move money from one scheme to another, whether that scheme is a UK one or a foreign scheme such as QROPS. For most of us ordinary mortals, the money markets are too complicated, and benefit/risk factors not as obvious as we would like them to be. That is why it's always a good idea to talk to an independent financial advisor before you take any action.
Finding a Reliable IFA in Spain
Spain is one of the most popular destinations that many expatriates choose when considering where to retire, and the QROPs option, which first became available in 2006, is something that is becoming more and more interesting to the expats domiciled here. So for Spanish based UK expats, finding a reliable IFA based in Spain who will be able to walk you through the pros and cons and give you the best professional advice is essential. But how can you go about finding a good IFA? Here is a quick checklist that will help.
- Make sure the IFA is registered with the Direccion General de Seguros (DGS) in Spain
- Find an IFA who is also regulated by the Financial Services Commission in Gibraltar
- Make sure the IFA is a QROPS specialist.
- Check out the IFA's website for free QROPS information that you can download.
- Ask for testimonials of satisfied customers who you may contact for confirmation.
- Use the expat forums and ask others for their recommendations and advise.
Always remember that your pension will be your lifeline, so finding the best IFA to advise and guide you with anything to do with your pension fund is an imperative.
If you found this article useful, please share with your friends using the buttons below or join us on Facebook.