As more people move and retire abroad there is an increasing demand from expats wanting to transfer their UK pensions overseas, it is claimed.
According to the de Vere Group, one of the leading players in the Qualifying Registered Offshore Retirement Schemes sector, moving pensions abroad gives investors greater flexibility and tax efficiency.
In the current market the deVere Group has transferred £98 million, nearly a quarter of all UK transfers, to offshore pension funds. ‘The expatriate market has always been our area of expertise. As more people move and retire abroad, there is an increasing need to service these individuals and in some cases help them transfer their UK pensions offshore,’ explained chief executive officer Nigel Green.
QROPS, personal pensions established outside of the UK which were recognised by HMRC in 2006, have become increasingly popular in recent years as more investors retire abroad and wish to benefit from greater investment flexibility and tax efficiency. Since QROPS were first introduced, it is reported that approximately £432 million has moved from onshore UK pensions to offshore pension schemes.
But there is concern about unregulated advice in the sector. Pension providers on Guernsey have raised concerns that unregulated advisors are using the channel island to mis-sell QROPS to investors and by breaching current regulations leave them with tax charges on pensions transfers of up to 55% on their total fund.
The want tighter regulation. Onward transfers from Guernsey to other QROPS providers are currently limited to a tax free cash drawdown of 25% of the existing fund. One proposal is to increase this limit to 30%. There is also a proposal to limit one off lump sum payments to 30,000. These are only proposals but they have strong backing and if supported at government level will in all likelihood become law,’ said Guernsey QROPS Committee chairman Roger Berry.
‘Unregulated advice on pension transfers is occurring in the QROPS market. From a UK centric perspective, where pension transfer advice is well regulated, that will be an uncomfortable fact and a natural reaction is of disappointment and wonder how this is allowed,’ he added.
Berry warns investors to be wary of schemes that offer to transfer small sums and schemes that offer to sanction transfers from defined benefit schemes. ‘Frankly, where there is little room for excuse is the transfer of final salary or defined benefits schemes. Unless the transfer is trivial in size, if your prospective new QROPS trustee is happy to accept such a transfer without independent assessments or an equivalent report being provided to you, alarm bells should be ringing,’ explained Berry.
Meanwhile, fears that New Zealand could lose its QROPS status over concerns with its Kiwisavers scheme, regarding tax breaks applicable to employer contributions, have been allayed. The issue is reported to have been resolved between HM Revenue & Customs (HMRC) and New Zealand’s government actuary, and the Kiwisavers scheme continues to appear on HMRC’s list of approved QROPS.