Factors to Consider When Choosing a QROPS

QROPS may not be the right investment opportunity for everyone. Having said this, QROPS can be beneficial for most UK pension holders. Here are 3 things you need to consider before taking up a QROPS:

Less regulation and protection

One of the most important things to consider when thinking of taking up a QROPS is to ensure that it is set up in an approved QROPS jurisdiction although your pension can be invested in financial products around the world.  Some of the approved countries offer less financial protection than what is provided in the UK.

When looking to invest in a QROPS this factor needs to be carefully considered because less protection means that you will have little or no compensation should anything go wrong. You may end up losing much of your investment. A lack of regulations also opens the door to persons selling unregulated investments and schemes.

Always make sure that the financial advisor you have chosen is qualified to sell QROPS products and that they recommend only jurisdictions which meet the proper regulatory compliances. Some of the most highly recommended jurisdictions include Switzerland, the US and EU member states. Make sure to ask for proof of regulations set out.

Choosing the wrong QROPS jurisdiction

There is a very real possibility that the wrong QROPS jurisdiction could be chosen for you. To make sure you are investing in the correct jurisdiction is to ensure that you know in which country you want to retire one day.  One great example s for those who want to retire in France, due to the direct tax treaty between the UK and France you will not pay income tax twice on your investment.

One of the best things you can do if you decide to invest in QROPS is to make sure you keep up to date with the latest changes in the QROPS jurisdictions. This might be a massive task for anyone, but it will ensure that your investment remains secure, enlisting the help of a trained professional financial advisor will also ease this burden.

While every jurisdiction has its own list of criteria which need to be strictly adhered to, your financial advisor might be able to make light of the complicated interactions as well as the rules and regulations. When selecting someone to help keep in mind that your trustee will need to provide you access to multiple QROPS jurisdictions.

QROPS and the future

Investing in QROPS allows UK expats the opportunity to collect substantial pension funds with tax relief throughout their working careers and then later avoid paying British tax on pension income in retirement.

While these benefits are generous, there is a growing concern that it might sound too good to be true and that they are simply put, too good to last. At any time the HMRC may decide to alter or completely remove QROPS in the future.