The world of overseas investing is often portrayed as the playground of the rich. With complex financial products in exotic locations, it’s easy to assume that overseas investments are out of the reach of the ordinary saver.
This is a common misconception which, after a little research, turns out to be untrue. In fact, with the steps expats can take to protect your savings from UK income tax, overseas investments are well worth a look.
Qualifying Recognised Overseas Pension Schemes are foreign pension schemes that the UK government has officially sanctioned to receive UK pensions free from tax. HMRC keeps a list of pension schemes that have met its standards of being regulated and taxed as a pension in its own country. However, this does not mean that the schemes are recommended by the taxman.
Contrary to popular belief, you do not need millions to make a pension transfer to an overseas scheme worthwhile. Some schemes give a minimum transfer value of the pensions that they will accept. Others accept funds of any value, but QROPS professionals may advise that a transfer may not be worthwhile from the point of view of fees and taxes unless your fund is worth more than £30,000.
When QROPS first started in 2006, the fees providers charged were high. Perhaps they felt that expats were so glad to be escaping UK tax that they could charge pretty much anything. Now, however, the market is much more competitive, and some QROPS are available for £500 per year. If your QROPS adviser is from a large firm of IFAs with considerable bargaining power, he might be able to negotiate further discounts from the rates providers offer.
So far, so good. With low fees and low minimum transfer values, a QROPS seems open to most people. But what about the fees that advisers charge? Some QROPS advisers charge for their advice by the hour. Others take commission from QROPS providers, so their service is free to their customers.
There are so many other benefits to QROPS that it is at least worth consulting an adviser for an assessment of your circumstances to see if there is a scheme out there that would suit you. For flexible access to your fund, low tax or tax free withdrawals and an opportunity for some effective inheritance tax planning, a QROPS is worthwhile for most investors, regardless of their budget.
