The Isle of Man is the top adviser choice as home for a QROPS, Qualifying Recognised Overseas Pension Scheme, according to a new study.
A third of IFAs (32%) opted for an Isle of Man QROPS over the thousands of others offered by 46 financial centres worldwide.
With 221 QROPS, the IoM has the third largest market share by number of the offshore pensions at 7% – but is way behind the leaders, Australia (38%) and Ireland (23%).
The other top QROPS for advisers are Gibraltar – scooping 26% of the vote – and Malta, winning 22% of the vote.
Gibraltar has 18 QROPS and takes 0.6% of the market, while Malta has 16, taking a 0.5% market share by number of pensions.
Gains at Guernsey’s loss
The poll was conducted by financial firm Skandia, who released the data with a statement which said: “The Isle of Man was ahead in the vote and is a well-respected offshore financial centre with IFAs and their clients, which helps maintain the island’s popularity.
“We suspect all three financial centres have gained as a result of HM Revenue and Customs effectively closing Guernsey QROPS to all but investors who live on the island.”
The study also disclosed at least half of IFAs who have already recommended a QROPS to clients propose to increase their offshore pension business over the forthcoming year, while 40% plan to maintain the amount of QROPS business they write at the same level.
Rachael Griffin, Skandia’s head of technical marketing, said: “Over the past few years, the QROPS market has seen a huge surge in growth and this looks set to continue due to a number of factors.
“These include the increasing number of people approaching retirement and the current fad for people to retire abroad. IFAs need to increase their knowledge about QROPS, their benefits for retirement savers and the reasons why they retire overseas.”
QROPS benefits and pitfalls
Recent figures from HM Revenue and Customs suggest around 10,000 retirement savers a year switch their British pensions into a QROPS.
QROPS can offer significant retirement and estate planning benefit to British expats and international workers with UK pension rights.
QROPS transfers can throw up complicated cross-border tax planning issues, including:
- Retiring to Australia, New Zealand or Canada with a QROPS based in these countries may trigger an annual wealth tax.
- Popular retirement destinations like France and Spain charge similar income tax rates as the UK, so benefits may be limited. Switching to the French tax system bars taking a tax free cash lump sum
Retirement savers considering switching their pension offshore should speak to a regulated IFA who has experience in transferring QROPS.