Friday, 11 February 2011

Ten things they won’t tell you about QROPS

The concept of QROPS is excellent, the quality of advice often lacking.

It doesn’t apply to all ‘International Financial Advisers’ but it applies to most. Some are guilty on all ten counts!

  • They put all their QROPS through one provider
There are four QROPS jurisdictions which justifiably dominate the market (Guernsey, New Zealand, Malta and Isle of Man) and between them cover the vast majority of client needs and wants. But many advisers deal with just one provider in one jurisdiction. This clearly is not in the clients’ best interest.

The reason these advisers do it is to lessen the admin burden, which frankly they should deal with anyway, and in many cases they receive extra commission sometimes call a ‘volume override’.

  • They put all investments through one company
Given that the QROPS exists through a Trust Deed, it is in effect a ‘wrapper’ The substance of the arrangement is the investment within the QROPS. Future income and fund values will directly be affected by investment performance. It is therefore vital that the adviser takes note of each individuals need.

It may surprise you to learn that many advisers put all or nearly all investments within a QROPS to the same investment company. I expect that you guessed why by now! They get a ‘volume override’. The more they place with one company the bigger the payout. But was it in the clients’ interests. – I doubt it!

  • They deny the existence of ‘In-Specie’ transfers
One particular discussion I had really sums up what I believe to be blatant misselling!

I had a conversation with an English guy now living and working in Spain who was telling me about his Self Invested Personal Pension (SIPP). Naturally, I asked if he had considered transferring to a QROPS. He told me that he was very happy with the investment returns in his SIPP and that his ‘adviser’ had told him that it wasn’t possible to transfer the assets in his SIPP to QROPS!

This advice is wrong

Such a transfer is possible and is known as an In-Specie transfer, this is perfectly acceptable and clearly good advice where the individual is pleased with his investment performance. He has ditched the ‘adviser’! Please don’t get the wrong ‘adviser’ email me

  • They can’t tell the difference between the rules and their own business plan
In many of the big companies, advisers who operate from their offices are told the rules. In many cases they not the QROPS rules but the rules applied by ‘company policy’

There is one in particular I’ll tell you about. A well known company, you have seen their adverts, tells its ‘advisers’ that the minimum sum for transferring to QROPS is £100,000. That is their business plan not the rules. Just a piece of corporate arrogance!

  • They refuse to disclose commission
You may not pay it directly by writing a cheque but you pay for the commission through charges. So why won’t they disclose how much they are making?

The requirement to disclose commission in the UK started in 1993. It is something that we all accept and take for granted. But many advisers in Spain not only don’t disclose, they arrogantly refuse to tell even when asked!

  • They don’t even fully disclose charges
I recently read a report on behalf of one of my readers who contacted me through . In a 17 page report charges  were mentioned a number of times but there was no table showing the total. That would seem reasonable or a single paragraph setting out the costs.

On reading it again, I found that although a complex financial structure was recommended there were no fund charges disclosed. This is key since, for example, cash fund charges should be low but ‘fund of funds’ are expensive. The adviser has a duty to point these out!

  • They tell lies about jurisdictions they don’t recommend
Lets be frank, they are talking about New Zealand!

There are a number of ‘big’ financial advice firms who are constantly knocking NZ QROPS. Yet again they fail to understand the rules. All QROPS, irrespective of jurisdiction have to send annual reports to the UK taxman (HMRC) up until the client has been UK non-resident for five full and complete tax years. After that the QROPS can adopt the rules in their own jurisdiction.

New Zealand always allow people who are non resident to have a capital return of their funds up to 100% of the value. It’s their rules and it is legal, above board and allowed.

You have a choice accept the HMRC approved list of QROPS providers or listen to a few salesmen who want to sell their product and don’t want you to take New Zealand. I will recommend you to advisers who are open minded and who will listen to your needs, if you email me.

  • They don’t write you an individual report
I raise this issue as it has been mentioned in feedback from several readers. Feedback is always welcome.

One client wrote ‘I am not certain that this company really knows who I am, it was clear that it was a mass produced document with a few of my details added’. You would think as they are taking your money (undisclosed commission) they could give you some individual attention.

  • They use the FSA as a marketing tool NOT a regulator
There are many examples of why this is true. Already mentioned are examples which would not be tolerated in the UK. But they are in Spain and they do get away with it.

Non-disclosure of commission, failing to declare all charges clearly and refusing in-specie transfers are all rule breaches in the UK. Most British people have of the FSA and it gives comfort to them when advisers are authorised by FSA. Little knowing that many, not all, advisers use the FSA for marketing recognition then ignore the rules!

I know FSA advisers who do obey the rules and I am happy to give you a recommendation. The same is true of advisers regulated in Spain by the CNMV and DGS authorising agencies. Please email me for details.

  • They charge an up front fee before they will talk to you
This is very definitely a small minority. They tell you that if you go-ahead with their recommendations the fee will be rebated. That of course merely puts you under pressure to buy from them!

10 bad practices for you to avoid!

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QROPS will be right for most people who have moved from the UK to work or retire and who are unlikely to return. Just be careful from where your advice comes and I can recommend advisers who do not fail any of the above.
Please contact me for a recommendation.

Thursday, 3 February 2011

QNUPS – Qualifying Non-UK Pension Schemes

QNUPS is a very pertinent component to Pre and Post retirement planning. It is important for long term investments, mitigating Inheritance Tax, both Spanish and UK, and especially relevant is the opportunity for ‘in-specie’ transfers.

  • Get authorised and regulated advice

  • Remember that QNUPS is a Pension Scheme

  • Ideal for In-Specie Transfers
I have recently read an article by a leading International Financial Adviser which contains inaccurate information. So very much like QROPS, with QNUPS you need advice from the right source. I can provide you access to a professional adviser, if you email me.

 I think the technical description is necessary. The Inheritance Tax (Qualifying Non-UK Pension Schemes) Regulations 2010 [S1 2010/0511] have introduced this acronym ‘QNUPS’. Weblink gets you to the precise Statutory Instrument (SI).

In short, in February 2010, HMRC confirmed that contributions to a Qualifying Non-UK Pension Scheme, would be exempt from UK IHT. What this means is that as long as the pension walks and talks like a pension, then the assets held in it will be protected from UK IHT.

This is not meant to be an exhaustive list, but I believe there are four categories of individuals who will most benefit from or should consider a QNUPS;

  • Any UK resident who from 6th April 2010 will be restricted on their UK pension contributions to basic rate tax relief.
  • UK domiciled persons (that includes many UK citizens who have become Spanish residents), and UK residents who want to make pension contributions beyond the UK maximum limits.
  • UK non-residents, including Spanish residents who already have a QROPS but want to add to their pension funds. A classic transfer would be UK savings receiving very little interest, including PEPs and ISA’s
  • Any UK resident or domiciled individual who wishes to build up a pension fund in excess of the current lifetime limit

QNUPS provides an excellent opportunity for in-specie transfers. Investments you have built up, properties you own and other revenue producing assets can just as easily be a pension contribution. The investment does not have to be cash but cash is not excluded. Remember that the QNUPS has to be a Pension Scheme but it is also a plan to defend assets from Inheritance Tax (IHT).

If any adviser suggests selling your assets and buying another financial structure beware. In-Specie Transfers offer a much more cost effective route, normally, and also selling assets can lead to a tax charge (eg Capital Gains Tax). To avoid this pitfall please speak to a recommended adviser. Please email me for details.

If you have assets that you want to transfer to QNUPS without cashing them in, then transfer In-Specie.

Remember the Regulators! I will only recommend an adviser who is authorised by one or more of the following;

Comision Nacional del Mercado del Valores is the principal financial services regulator in Spain and responsible for authorising investment products. A CNMV adviser can be recommended, please click here

Direccion General de Seguros y Fondos de Pensions is the Spanish regulator for insurance products which can be marketed in Spain. Email me to be referred to an authorised adviser.

The Financial Services Authority is the UK's financial services regulator. Many British clients prefer a UK adviser and have dealt with FSA regulated advisers in years gone by. For an introduction to recommended adviser, with experience in Spain, please click here .
If you have your own question, I’d be delighted to answer it. Those of you who live in Spain or intend to live in Spain should be very careful when choosing an adviser.

You can write to me with your personal experiences or to be put in touch with my recommended adviser by sending me an email