Over the last few months, TailorMade has run a hugely successful series of blogs called 10 reasons to use a QROPS – Facts and myths. It has focused on the selling of QROPS by multiple websites using inaccurate or partial information to “sell a benefit” that may not exist.
We say hugely successful as they have been one of our most visited and re-tweeted series of articles, with feedback from both the public and the professional financial community who had also come across many of the issues we highlighted.
From the 10 reasons to use a QROPS – Facts and myths there have been 3 that have stood out as conversation stoppers:
Most read – 1st place:
Avoid 45% tax on your UK pension on both income and inheritance tax
Outcome – Myth – On death before 75, there is no tax on UK funds. For money purchase pensions the whole fund can be paid in cash to the beneficiary. Over 75, the spouse, for example, can leave the fund intact with no tax and take the option of a taxable income ( locally and not 45 % UK Pension tax) . On the death of the spouse, the grandchildren can take tax free income up to their allowances, or children or other beneficiaries can inherit a tax free pension fund in the UK. Pension funds are taxed in the hand of the beneficiaries since April 2015. We suspect no one will pay 45% on the pay-out if they take professional advice.
QROPS provide increased investment flexibility
Outcome – Myth – Increased Investment Flexibility with QROPS is largely used as a method to get clients away from proper regulation, enabling the sale of unnecessarily expensive investment bonds, unregulated/illiquid funds or institutional structured notes (also known as structured products). Please note the common thing is that they all do is make the salesperson a lot of money through undeclared commissions.
Your pension is at risk in the UK with your trustees
Outcome – Partial Myth – The pension deficits in the press are giving rise to a considerable amount of poorly informed opinion and decisions; they are a convenient sales angle used to concern clients into taking an action that may not be necessary as other options including cheaper UK pensions should be considered, or leave small funds where they are; ironically transferring to a QROPS could put people’s funds at more risk with less protection than if they left pension funds in the UK. There is no correlation between the use of a QROPS and pension deficits, and one does not assist the other, and should not be sold as the only solution. Once guaranteed benefits are transferred they are lost.
We offer a forensic review of the 10 reasons to use a QROPS for those that would like revisit the QROPS and investments they hold. Increased investment performance and lower charges may make a significant difference at retirement.
Some offshore salesmen promoting QROPS as an investment solution live in a parallel universe where they claim to make world stock markets behave differently in QROPS than they do if the same funds are used from and within UK pension funds. Think and behave logically, if promises of bigger returns can only be achieved by moving to a QROPS then why hasn’t the entire UK pension industry moved offshore? It hasn’t!
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
This article was published on 3rd February 2017
- 10 Reasons to use a QROPS. Facts and Myths, QROPS Increased Flexibility (7)
- 10 Reasons to use a QROPS- the facts and the myths (1)
- 10 Reasons to use a QROPS – All the Facts and Myths
- 10 Reasons to use a QROPS – the facts and the myths – 45 % UK pension tax (2)
- 10 Reasons to use a QROPS – facts and the myths – Frozen Pension Plan Options (3)
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