We are delighted that Simon Birch of Currency Solutions agrees with our previous posts about being wary of unqualified QROPS advisers and has written a great consolidated update – Links provided to see the original here .
TailorMade Pension original links below:
This is the article about avoiding unqualified QROPS advisers in full posted by Simon Birch, with our own Summary added at the bottom:
“A QROPS (Qualifying Recognised Overseas Pension Schemes) is an overseas pension plan that might be the best way for you to transfer your pension abroad. Since launching in 2006, QROPS have only been getting more popular with British expats retiring to Spain. Since they meet requirements set by HM Revenue & Customs (HMRC), the HMRC website provides a list of recognised schemes.
There are two things you’ll hear about QROPS: They let you give the taxman the slip. And, pensioners can fall prey to unqualified advisers!
Can you avoid paying taxes with a QROPS? Well, you’ll have to speak with a trusted financial adviser who isn’t trying to sell you a QROPS to sort that one. The short answer is that you’ll still pay some UK and Spanish taxes.
As for the risks of entrusting your financial future to an unqualified advisor in Spain? Relax. You’ll be able to spot the fraudsters once you’ve learned what to expect from a properly qualified professional pension adviser.
Why are QROPS so popular?
QROPS are an excellent way to carry over a large pot of savings and investments when you move to Spain. By consolidating several pensions, they make them more cost effective. And they offer far more investment flexibility than UK pensions. QROPS can hold an unlimited size of funds which are free from capital gains taxes. Unlike traditional pensions, unused money can be passed onto your family after death.
If you haven’t yet begun drawing it, putting your pensions (and investments) into a QROPS might be ideal. Once you’re been living outside the UK for 5 years, you can pull out 30% without paying UK taxes- but it would be taxed as income in Spain, like any other pension income.
If your pension funds are between £200,000 and £1,000,000 and you’re not planning to return to the UK, you’re a good candidate for a QROPS in Spain.
When Not to Consider a QROPS
You’re unable to transfer your UK State pensions to a QROPS. Also, pensions that have existing annuity arrangements can’t be transferred, either. And pensions aren’t eligible if they’ve already made distributions from final salary schemes.
If your pension funds are under £200,000 and you need to rely on it for your income, you probably won’t benefit by moving your money to a QROPS due to UK tax laws.
Spanish tax laws require that you declare income, regardless of where it’s earned. Factor this in when considering the QROPS location of Gibraltar. Gibraltar’s 2.5% income tax is a lot lower than many regions. But since Gibraltar doesn’t have a Double Tax Treaty with Spain, if you’re living elsewhere in Spain, you’ll pay additional Spanish income tax.
7 Tests your Qualified QROPS Adviser Must Pass
While there are advantages of using QROPS in Spain, unfortunately there are also unregulated investment advisers offering unsuitable products. You’ll find yourself stung if these investment companies fail. And since they earn their money only if you invest, they’ll suggest you open a QROPS even if it isn’t in your best interest.
A properly qualified adviser has specific pension qualifications and experience. They’re chartered financial planners and members of professional associations such as the Personal Finance Society (PFS) or Chartered Insurance Institute (CII) who can provide references and proof of their membership. Their office should display original certificates with gilt edged borders, and if they don’t look authentic, assume they aren’t.
In the UK, the Financial Conduct Authority (FCA) requires that all pension advisors have the following four qualifications, and so should you. Check that these certificates are displayed:
• Fellow or Associate of Faculty of Actuaries
• Chartered Insurance Institute certificate G60 or AF3
• Pensions paper of Professional Investment Certificate(IFS)
• Fellow or Associate of the Pensions Management Institute
Make certain your adviser meets these 7 tests:
1. Request to see their credit card sized PFS and CII membership cards. Check for: Gold or Silver colours on a firm plastic card material with an expiry date and a pin.
2. Be sure they have permission to advise on QROPS in Spain because they’re listed on with the Spanish Investment Regulation body: CNMV.
3. Be wary of hidden offshore fees. All charges should amount to 1.6% or less. ( Tailormade comment : only if ETFs and passives are used- if not under 2%pa should be the norm )
4. See that they have access to the entire UK Sipp market as well as the QROPS marketplace.
5. Request independent client references that you can ring for honest feedback. Website testimonials are no substitute.
6. If your adviser says they’ve worked in the UK, you can easily check on them as they would have been registered with FCA.
7. You should have prospective contracts and fees in writing to look over for a few days before agreeing to any recommendation. It should go without saying, but be sure the report is on the firm’s headed paper and includes your adviser’s name and the regulatory body’s information.
The report should include:
• Links to your place of residence that prove your adviser isn’t passing your fund to other offshore agents who aren’t locally regulated
• The rationale for all recommendations
• Your current status, future plans
• The risks you’re prepared to take
• All product costs and fees broken down individually
• The commission, fees or hourly earnings your adviser will receive
Be assured that there are excellent QROPS advisers who are only too happy to provide you with their certificates. If you’re better off without a QROPS, they won’t sell you one. They’ll insist on giving you a contract including all of the above points. Knowing what to expect from a qualified adviser is your best protection from those who can’t be trusted with your retirement income.”
TailorMade Pensions Summary – Avoiding Unqualified QROPS Advisers
We believe this article mirrors what we have been saying for some time, and are naturally delighted to see other bloggers referring to these matters. The only thing we would add is to encourage the reader to avoid the presumption that QROPS is the solution. TailorMade would state that the alternatives should be considered in the following order:
(1) Leave pension where it is and review the investments available, or existing plan flexibility; or,
(2) Consider a transfer to a another type of UK pension (often cited as a SIPP but not necessarily always the best one); or,
(3) Consider alternatives like annuities, guaranteed third way pensions, QROPS, etc
Some countries are not tax efficient for pensions such as Spain and France to name but two, and moving to a QROPS can be worse than looking at the alternatives sometimes.
End – 7 must read tips about avoiding unqualified QROPS advisers
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 21th February 2017
- QROPS in Spain | QROPS Advice
- Moving to Spain
- QROPS in Spain
- Pensions in Spain
- Spain- Insurance bonds in pensions, is there a tax advantage?
Share this story