Many independent financial advisers are reluctant to explain your offshore pension options if you are about to become an expat – mainly because they fear giving poor advice about Qualifying Recognised Overseas Pension Scheme s (QROPS).
IFAs are in a quandary over QROPS.
They are damned if they give advice about a product they know little about because they could face misselling allegations in the future.
They are damned if they don’t give advice about QROPS because the Financial Conduct Authority, which regulates IFAs in the UK, says they must include QROPS in any pension review where the offshore plan may seem appropriate.
That does not really help a prospective expat who wants to make financial plans for their shift abroad or a non-resident who has lived or worked in the UK for some time and built up a pension pot before leaving again.
Both these clients need someone to fill in the blanks, but tracking down an experienced QROPS adviser is not easy.
The offshore financial advice industry has a bad name because some advisers decided it was in their own interests to take money from their clients and run.
But to be fair, although QROPS have experienced some difficult moments with shady advisers and dodgy providers in the past, so have onshore pensions – and let’s not go into the billions in compensation Britain’s banks are refunding for cheating their customers.
QROPS are a good retirement saving product for some expats and international workers.
For someone with a public service or civil service pension or a final salary scheme, then best advice is to weigh up the value of the death benefits that would be lost in switching to a QROPS against the tax gains.
In truth, nearly every time, the argument would come down in favour of not transferring these pensions offshore.
Successful QROPS transfers
For the rest of expats, even with small funded pensions, QROPS can be an attractive proposition.
Expats are rushing to take them up. HM Revenue and Customs reckons around 10,000 retirement savers swap their UK onshore pensions for QROPS every year – and the number is growing.
To find the right IFA, look for someone who works for a firm with a demonstrable track record of successful pension transfers.
The adviser should have back-up from a team who can offer cross-border tax advice and manage the investment of the pension fund.
Lastly, they should not be tied to a small number of providers or a financial centre, but should devise a short list of QROPS pensions from across the market that suit your personal financial goals.