Figures released under the Freedom of Information Act this year showed that only around 7,300 UK pensions were transferred into QROPS from private schemes in the first two years the scheme was introduced. This is a substantial number, but given that over a hundred thousand people emigrated during each of those years, the question is, why didn’t they all get one?
A common myth
It’s a common myth that QROPS are just for the superrich. Brits typically associate offshore and overseas investment opportunities with the superrich, rather than with people who have just worked hard to save a decent pension pot.
But QROPS are available to a range of people. Most QROPS providers do not specify a minimum level of investment (although some do). If you are unsure about whether a QROPS is worthwhile for you, then your QROPS adviser should be able to work out what the fees and charges would be.
The 5 year rule
No figures are available to say how many of the thousands of people who leave the UK every year intend to be away for five or more years. The QROPS rules state that, in order to be able to take advantage of the UK tax exemption, QROPS investors must be non-resident for more than 5 years. Accordingly, if you are planning to take a work placement abroad for a couple of years, a QROPS may not be for you.
Final salary schemes
The only other reason why a QROPS may not be suitable could be if an investor has a final salary scheme backed up with a gold plated guarantee (e.g. already accrued public sector benefits). However, given that such schemes are fast becoming extinct, it is unlikely that all of those Brits who became expats in the last few years had final salary schemes.
Inertia
Finally, we come to the real reason why thousands of Brits miss out on QROPS each year. Loyalty to their current financial institution plus apathy towards looking around for something else are typical traits of the British consumer. But when you consider exactly how much this inertia may be costing you (in terms of UK tax you could legally avoid), you may realise that a QROPS is worth looking into after all.
