There is a lot of hype about the choice available for QROPS. There are over a thousand schemes in more than one hundred different countries. But how do you know that you are picking a good one? If moving your pension abroad is your first foray into overseas investment, it can be difficult to judge products from unfamiliar jurisdictions.
This week it’s been reported that government and industry officials in Guernsey are joining together to write their own code of conduct about selling and regulating QROPS. According to the key players, not only do the QROPS providers want to offer and run high quality products, but the move is also likely to raise confident in investors’ perception of what the finance industry in Guernsey is like.
To get HMRC’s approval as a QROPS, a scheme must be taxed and regulated as a pension in its own country. However, there is a wide variety in the degree of regulation that goes on in QROPS destinations. On one hand, those countries who interfere most with pensions risk appearing unattractive to QROPS investors who are probably looking forward to escaping the nanny like approach of the UK system. On the other hand, if a country is too lax, it runs the risk of being perceived as offering limited protection to investors, and promoting or allowing practices that are not above board.
Investors also find themselves faced with the decision between a young financial centre like Malta which was only approved this year for QROPS, and older, established investment communities like the Channel Islands. Will the newer entrants to the market offer innovative schemes? Has the arrival of new competition contributed to Guernsey’s desire for a new code of conduct?
When choosing a QROPS, straying from the HMRC’s list is not an option – you risk a fine of up to 55% of the value of your fund if you transfer your money into a scheme that has not been approved.
Taking this into account, professional advice is not just desirable, but essential. Your QROPS adviser should have a wide understanding of many jurisdictions so that they can advise on a decent range of schemes for you to choose from. And if this doesn’t sound difficult enough, you need an adviser who is up to date with the latest changes that foreign regulators bring in. It only takes a Budget or treasury announcement in your QROPS destination to change the fate of your pension, and your adviser should be able to inform you about it, and make provisions for a response.