Wednesday, 16 March 2011

QROPS - Questions and Answers

Updated with readers questions

·        Is there a minimum amount for QROPS?
·        Explaining New Zealand QROPS and Foreign Trust
·        You can move your UK pension assets to QROPS
·        Who can advise me?

 Qualifying Recognised Overseas Pension Schemes (QROPS) were introduced in April 2006, by the UK Government, as part of a process called Pensions Simplification.

In this ‘Question and Answer’ format should be the main issues for those of you who live in Spain or indeed those who intend to live in Spain. Individual queries can be sent by email

What’s the minimum amount I can transfer into a QROPS?
Some advisers regard sums of under £100,000 as ‘small pots’ not worth transferring. However, with extremely low annuity rates and poor rates under the GAD rules, readers, with less than £100,000 to be transferred, need and deserve advice. New Zealand QROPS, which I have dealt with, are certainly worth readers looking at. Let me recommend an adviser, click here. If your adviser says your fund is too small – seek a new adviser!

Is the New Zealand Foreign Trust (NZFT) a QROPS
Strictly speaking, NZFT is not a QROPS but it is an investment option for the cash from a New Zealand QROPS. The NZFT has very favourable Trust arrangements, a very liberal view of what can be invested, including property, together with no rules on levels of income. As it is a specialist facility, please let me introduce you to an appropriate adviser by emailing me. You need to be UK non-resident for five full and complete tax years to qualify.

Is the transfer into a QROPS expensive?
The main cost associated with a QROPS is the preliminary registered scheme
transfer work that is required before your pension assets can pass into a QROPS. This is specialist work and I’ve never thought cheapest is best in professional advice. However, it must be reasonable. A really good financial adviser, who is properly authorised and regulated, will put the costs in writing, before expecting you to sign up to their scheme. I’m happy to recommend such an adviser if you contact me here. Please be aware that some advisers  don’t tell you the costs in an open and unambiguous way. Always seek clarification.

As part of my ‘second opinion’ option, if you have a report which is unclear, send it to me and I will give my thoughts.

I’m happy with the investment in my SIPP, why can’t I transfer it to QROPS?
If an adviser indicates that you cannot transfer your existing pension investment to QROPS they are wrong. This type of transfer is known as an ‘In-Specie transfer’. It is acceptable in QROPS because to meet the rules in the UK the investment has to be approved. If the investment is acceptable in  UK pension funds then it is perfectly satisfactory in QROPS.

Some advisers have difficulty in distinguishing between their own business model and the rules! To avoid such advisers, please email me

What can I invest my QROPS assets in?
There is a flexible choice open to you and part of a good adviser’s process is to determine and agree an investment strategy which closely matches your needs. Your attitude to investment risk is also key, since it will indicate the asset classes that you should use and those to avoid.

Will any benefits I take from QROPS be taxed?
QROPS income is generally not taxed at source. The tax treatment of what you receive is very favourably treated in Spain, though you need individual advice to explain how it affects you.

What will happen to my QROPS when I die?
Any funds remaining when you die will either be paid to those nominated by you as beneficiaries or those same beneficiaries may simply continue deriving the same tax free advantages you were enjoying in your lifetime.

Are there any circumstances in which I shouldn’t transfer to a QROPS?
If you want the certainty of income and are prepared to hand over your fund to a pension provider, then an annuity might suit you better than QROPS. I would not suggest you to transfer to QROPS if you intend to be expatriate for less than six years, but you need advice from an authorised and regulated adviser.

I’ve heard about unscrupulous QROPS providers and intermediaries, any
comment…?
In May 2008, Her Majesty’s Revenue and Customs (HMRC) withdrew status from all Singapore based QROPS. This action emphasises the importance of taking independent advice from industry experts who are in regular contact with HMRC to ensure that any transfers do not nor are likely to fall foul of HMRC regulations. The best advisers can also offer a choice of QROPS based in more than one jurisdiction. Ask to be introduced

Which is the best QROPS jurisdiction?
The only honest answer is that it depends on personal circumstances and can also be determined by an individuals own preferences. I can say that for Spanish residents the worst jurisdiction would be Spain!

If the pension value is quite modest and you have been UK non-resident for more than five full and complete tax years, then New Zealand is a credible jurisdiction. Under these circumstances you have the option to encash your pension plan.

By being open and frank with an authorised and regulated adviser, a plan can emerge which has to be in the individuals best interests. If you email me, please give me a brief outline of your circumstances and what your immediate objectives might be. I will ensure that you get authorised and regulated advice. If you live in Spain and are considering a Pension Transfer (including QROPS), the adviser that I recommend will regulated by one or more of the following;

CNMV
Comision Nacional del Mercado del Valores is the principal financial services regulator in Spain and responsible for authorising investment products.

DGS
Direccion General de Seguros y Fondos de Pensions is the Spanish regulator for insurance products which can be marketed in Spain.

FSA
The Financial Services Authority – the UK’s financial services regulator.

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If you have a further 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 a recommended adviser Email me here

For most people, a pension fund is their second biggest asset. Do not get involved with unauthorised and unscrupulous ‘advisers’.

From my own experience, I only ever recommend advisers that I know and even then I am happy to help my readers by ‘looking over their shoulder’. Whatever you decide to do please tread carefully.