When you have made the decision to move your UK pension abroad, how do you set about deciding where to invest it? This is not a choice that you will make alone, as professional advice is essential. But this is what your QROPS adviser will take into account to assess whether or not a scheme would suit you.
Tax efficiency
You may give a sigh of relief to escape the UK taxman, as QROPS can be drawn without paying any UK income tax. However, given that the schemes will be taxed in their new jurisdictions, and any income or capital that you draw may be taxed in your new country of residence (if different), you need to be careful that you have not moved out of the frying pan into the fire.
Fortunately, low tax offshore regimes like Guernsey, Jersey and the Isle of Man offer QROPS, which gives you some opportunity for tax planning. Your QROPS adviser will weigh up your projected tax burden (if any) against likely benefits of proposed schemes.
Inheritance tax
Perhaps inheritance tax planning is often neglected because it involves contemplating one’s one demise. But it is worth casting aside any reluctance you have to think about this possibility to embrace the IHT planning possibilities that a QROPS offers. Once again your QROPS adviser will weigh the benefits offered by a particular scheme with any regulatory difficulties it may present.
Your money when (and how) you like it
QROPS can offer greater freedom than a UK scheme both for how your pension assets can be held, and how you can get to them. For instance, the thousand or so schemes that are offered worldwide offer a myriad of permitted underlying asset classes in their respective jurisdictions, which gives you more choice than limited range of options available in the UK.
When it comes to getting hold of your pension, a recent survey by Skandia International revealed investors’ frustration at the UK system’s requirement to buy an income bearing product by their 75th birthday. The issue does not seem to be a resistance against annuities per se: rather the imperative to throw in one’s lot at a prescribed point in time. Looking around for a QROPS means that a pension saver can choose one in a jurisdiction that does not have such a strict timetable to prescribe how and when pensions are spent.
