+44 203 290 6685 info@valiant-wealth.com

When it comes to QROPS there are a few ways of administering the investments – although most people are only ever presented with one option. As the QROPS trustees are not set up to provide this service (they merely provide the legal structure and fulfil normal trustee duties) you will need some kind of investment vehicle.

One option is to appoint a direct Discretionary Fund Manager (DFM) that can take complete care of custody and management.

The alternative is to use either an investment platform or an insurance bond. Both provide what you would expect in terms of robust custody so that the investments are secure and both should provide a good level of service in terms of offering open architecture investment choice, different base currency options (such as GBP, USD or EUR) and online service so that you can view your portfolio at any time.

So, what are the differences?

An insurance bond is usually referred to as a ‘tax wrapper’ and can be an effective tool in financial planning outside of pension products as a way of achieving a gross roll-up of gains and deferring capital gains tax (CGT). This is not necessary within a pension however as CGT does not apply. Popular providers in the QROPS market include: Old Mutual International, RL360, Friends Provident, Generali Worldwide, Providence Life and STM Life.

Bonds are often favoured by advisors because they are able to pay out generous commissions as high as 8% up front (a practice that would not be allowed in the UK). This up front commission is paid to the advisor on day one and paid back by the client over a fixed term (e.g. 10 years). The charges are linked to the initial premium so if you withdraw money at any point in that term then you will still have to pay the same fees which are now higher as a percentage.

There are additional costs to consider also such as an annual administration fee of between £400-£500, custody fees and trading fees.

The alternative to a bond is to use an investment platform which does not pay any commission to advisors. Platforms will typically charge an annual fee linked to the size of the portfolio, there will be no administration fee and custody/trading fees are generally lower than bonds also. Importantly, as no commissions are paid you will not be penalised for making any withdrawals.

It’s not always a simple case that platforms beat bonds in a game of QROPS Top Trumps. Depending on the age of the client and the size of the pension, bonds can provide a more cost-effective investment vehicle but only if they are used without commissions being paid. In this instance, the bond provider would charge a small up-front fee, there would be no ongoing percentage fee with just an annual admin fee and custody/trading fees to consider.

A good financial advisor will present you with both options and explain how both work in terms of the security of the assets and usability. It is then imperative that they break down the fees and make comparative forecasts to demonstrate the most cost-effective over the long-term. Cost is not always the overring issue however and other matters should be taken into account. By following this process, the advisor is demonstrating transparency.

As fee-based advisors (meaning that we DO NOT TAKE COMMISSIONS FROM PRODUCTS), it makes no difference to us which structure or providers we recommend as we are not rewarded or incentivised in this way. Our only interest is to recommend the most suitable product that meets the client’s needs.

QROPS ADVICE FOR EXPATS

WHY CORONAVIRUS COULD BE GOOD FOR YOUR PENSION

One thing I’m telling all my clients at the moment is to read beyond the headlines to fully understand the economic impact of the reaction to Coronavirus. I hope that if you’ve made it this far beyond headline of this article that you’ll read on to find out what I...

What Happens to my QROPS if I Move Back to the UK?

If you have left the UK and been advised to transfer your pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) but now intend to return to the UK then you need to consider how this pension will now be treated. While many expats and professionals who have...

QROPS MYTH #9 – Brexit will affect your pension

Let’s look at this realistically. If you’re an expat in Spain, for example, and the UK leaves the EU do you really think that your UK-based pension provider will be unable to make a payment to you now that the two countries are not joined by the EU? Is this not...

QROPS MYTH #7 – Structured notes are suitable investments

A consequence of transferring your pension away from the UK opens you to the risk that your funds will be placed into investments that would not be allowed if it was still under the watch of the UK’s Financial Conduct Authority. There have been many cases of clients...

QROPS MYTH #6 – You need to keep a large proportion in cash

Any investment portfolio should always contain a small proportion of cash but by small we mean around 2-3%. If your pension has a cash account of somewhere around 10% then you might want to question whether this money really exists. Consider it this way, pensions are...

QROPS MYTH #5 – QROPS are ‘approved by HMRC’

HMRC do not approve anything! It is not their function. Their purpose, as stated on the website https://www.gov.uk/government/organisations/hm-revenue-customs is: “We are the UK’s tax, payments and customs authority, and we have a vital purpose: we collect the money...

QROPS MYTH #3 – Your UK scheme is going to go bust

It’s true that there have been many high profile defined benefit pensions that have gone bust in recent years. The fundamental principle of the way that defined benefit pensions are structured can indeed sound like a risk. A defined benefit pension will promise to pay...

QROPS MYTH #1 – Your pension is at risk if you leave it in the UK

What risks? Brexit? Tax? Schemes going bust? What risks have you been told about? The only risk is believing someone who is giving you advice that is biased in their favour. If someone is going to profit from helping you to transfer your pension overseas then you need...

UK PENSIONS AND DEFINED BENEFIT TRANSFERS

WHY CORONAVIRUS COULD BE GOOD FOR YOUR PENSION

One thing I’m telling all my clients at the moment is to read beyond the headlines to fully understand the economic impact of the reaction to Coronavirus. I hope that if you’ve made it this far beyond headline of this article that you’ll read on to find out what I...

The ‘Greta Thunberg Effect’ and The Rise of ESG Investing

By Adam Smith As you have probably heard Greta Thunberg had quite a 2019 which resulted in her being named the 2019 Time person of the year. The level of attention she has brought to the climate crisis is quite astonishing especially considering she was 16 years old...

What Happens to my QROPS if I Move Back to the UK?

If you have left the UK and been advised to transfer your pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) but now intend to return to the UK then you need to consider how this pension will now be treated. While many expats and professionals who have...

FREE QROPS CONSULTATION

We’ve helped countless expats and international professionals with their existing QROPS. Through a free consultation we can help you to understand several key matters:

  • The existing structure.
  • The commissions paid out.
  • The charges for the structure.
  • The suitability of the underlying investment portfolio.
  • The tax implications according to your current and future residence.
  • An examination of the transaction history to understand where and why fees have been leaking out.
  • Alternatives to reduce your fees and improve management.
  • A detailed report and written evaluation of the options available to you.
  • Transparent, independent, fee-based, UK-regulated advice.