26 April 2010
QROPS TAKES THE OFFSHORE MARKET BY STORM
Meyado Private Wealth Management Singapore has seen a dramatic rise in the number of clients wishing to transfer their UK pension to an offshore environment.
According to the statistics, there are currently 7 million UK expatriates and this number is expected to grow to around 16 million by 2020. The QROPS market at present is in the region £400m and is expected to rise as expatriates realise the benefits of moving their pension arrangements offshore.
QROPS is essentially the transfer of a UK pension to an offshore centre which, since the launch, has resulted in millions of pounds of assets moving from UK pension schemes and into schemes administered by pensions trustees based in offshore locations such as Guernsey and Isle of Man.
Moving pension assets offshore has the added advantage of currency options. For example, people retiring in Singapore want to receive their incomes in Singapore dollars. This however can be expensive as moving from Sterling to Singapore dollars today is 30% more expensive than it was 3 years ago. Without proper foreign exchange advice and planning this could be a costly move which will potentially impair pension income for years to come.
Since launch, QROPS have become more cost effective but there are still many schemes on the market charging very high fees for the transfer of funds. Meyado recommends that potential QROPS clients ensure they are getting good value for money in terms of underlying fees imposed by trustees, fund managers and advisors.
In addition to the costs there are a number of important considerations that consumers should consider carefully. For instance investment planning and management, foreign exchange issues, jurisdiction, retirement location, and QROPS provider.
One further consideration for consumers is pension busting. This has been a big cause for concern for the UK government in the past and QROPS has no facility for this. There are some jurisdictions offering QROPS and allowing the option of removing capital in short periods of time. However, these types of schemes should not be considered as Qualifying under the HMRC guidelines.
Also, whilst repatriation may not be on everyone’s agenda, there are many expatriates who return to the UK late in life after spending many years overseas. Taxation of repatriated offshore pension incomes can be prohibitive so consumers should keep this in mind and plan accordingly.
Mark Paine, managing director of Meyado Singapore, said:
“We are delighted to see the increase in interest in QROPS amongst our clients. Whilst is it evident that QROPS have increased in popularity, they have presented their own challenges to the financial sector.
One of the key benefits of QROPS is the ability for individuals to take control of their pension assets. But is it vital that clients ensure that the control is however in the right hands. Annuities may often work in the favour of the pension trustees but they also provide an income for life with a level of guarantee and peace of mind in old age can’t be underestimated.
“Consumers must have the confidence to move away from a well established pension environment and be comfortable handing control of their retirement assets to pension trustees who are advised by the QROPS provider and a financial advisor.”