by John Westwood features@algarveresident.com
John Westwood is the Managing Director of Blacktower Financial Management Group.
There are many QROPS providers on the market, but which one should you choose?
In the early days of QROPS, certain elements of the international adviser community were attracted to the promise of early and total access to pension funds.
HMRC has been quick to act against schemes and jurisdictions that it believes are abusing the system, and the emphasis has now shifted in favour of professional advisers looking for long-term, compliant homes for their client’s pension funds.
Clients and advisers alike are attracted to the highly advantageous tax planning and the opportunity for long term management of investments for future generations that QROPS provide.
This has been evidenced by the increasing number of referrals that my own company receives from some of the largest names in client tax planning.
Initial scepticism has been replaced by a desire to learn more about QROPS and work with providers operating within first class regulated jurisdictions.
Research and due diligence has led many advisers to conclude that Guernsey is the optimal place for their clients’ QROPS.
Whether you decide Guernsey or another jurisdiction is right for you, you will be faced with important decisions about which QROPS provider you should use and many advisers are yet to feel confident or really have the full technical knowledge to make a solid recommendation here.
As with all financial recommendations, it is essential that you fully understand the product and all its features. I would recommend looking at the following features of any recommendation before making any decisions.
• Financial strength and reputation of the provider
• Service
• Charges
• Compliance with rules
• Flexibility
There is a vast difference between many of the providers active within the QROPS arena. Certain schemes are offered by the trust departments of multi-national investment houses with other schemes run by smaller trust companies with a few directors’ limited resources and a handful of staff.
In my opinion, it is important that you are aware of the resources and strength of the provider and choose a QROPS company with the strongest financial reputation. Not only does this give reassurance to you but is also important for you with regard to the essential support and service you will require.
Customer service
Service is always an important issue and one that is likely to become even more so over time. Consider traditionally trust companies dealing with a limited number of complex trusts and company structures with a focus on a few wealthy families. Their services are often bespoke and highly tailored to these clients.
QROPS is a different proposition; here we are talking about a large market proposition with the potential for tens of thousands of schemes. We have already heard of instances of delays and very poor customer service as companies struggle to cope with the administration.
Administrative capacity
Managing a few bespoke trusts is very different to being a pension provider. The majority of trust providers do not have experience of administering pensions with their own complicated set of rules. As a result ,some may unintentionally break the rules, which could put the scheme and indeed you at risk.
Therefore, when choosing a provider ensure that they have adequate capacity and staff knowledge and experience to deal with pension administration. Make sure that they can scale their services so that in future you can be confident that you will receive a high quality of service.
Pricing
In life it is very rare that cheapest is best! This principle hold true for QROPS.
We have seen changing structures at both ends of the scale and both have problems. Being the highest cost provider has obvious disadvantages but you may be asking what can be wrong with the low cost option?
Low cost is fine provided that the product meets your requirements, that the service proposition is delivered and that the costing is sustainable. The questions that might be asked are: Who are the trustees and directors of the QROPS provider? Who is the QROPS provider owned by? How many people work for them? Do they have pension knowledge or experience? Will they give value for money or lead to dissatisfaction that you have to deal with?
Bending the rules
There have been instances with more aggressive schemes trying to gain market share by pushing the rules to the maximum and beyond. This may attract some short-term new business but they run the risk of upsetting their local Revenue and indeed HMRC.
I would suggest that you keep away not only from aggressive jurisdictions but aggressive schemes. If a provider promises a unique feature, it might be worth taking a very close look at its position on tax compliance.
One of the key advantages of a QROPS is flexibility, but not all schemes have the same features. For example, some schemes insist that you invest in their family of investment funds, other schemes will not allow property purchases.
Naturally, the type of scheme that is right for you will depend on your current and future investment needs.
In our experience, clients have been looking for access to a range of discretionary investment managers, direct property investments, in specie transfers, collective investments using a number of different platforms, cash accounts and so on.
In conclusion, I believe that QROPS represents an excellent opportunity for clients to gain real value in retirement planning.
Choosing the right jurisdiction and right QROPS provider will mean that this opportunity does not become a future burden.
This is a complex area and I believe that presently the market is abundant with some pretty mediocre advice.
If you are considering a QROPS transfer make sure you seek professional advice from a company that can deliver the correct pensions transfer knowledge of UK pension scheme.
Once a transfer is made, there’s no way back.
Blacktower Financial Management Group – Telephone 289 355 685.
