Jean-Baptiste Alphonse Karr once said "the more things change, the more they stay the same" and, in the world of QROPS, never was a truer phrase quoted.
For those of us with non-UK IP addresses, we continue to be bombarded with the same links to websites making the same claims- with no thought or knowledge as to how UK pension schemes work.
The Dunning-Kruger Effect helps explain this in a simple graph. The advisers that promote QROPS need to decide where they are on this learning curve and put in the studying and learning to move to the right. None of us can say we are truly experts in all things QROPS.
Let’s look at just a few of the “Usual Suspects”. The common phrases that appear on adverts.
A QROPS means never needing to buy an annuity
Well, it is the same for a UK pension
QROPS allow 30% tax free lump sums at retirement, UK pensions only allow 25%
Well, that all depends on what type of pension in the UK. Some could allow 100% lump sums without UK tax at retirement, something that would be lost on transfer to a QROPS.
Unlike UK pensions, QROPS allows investment in different currencies to reduce currency risk
Some UK SIPPS have that facility too.
A QROPS fund is not liable to IHT ( Inheritance Tax )
So, just like a UK pension then! The tax referred to is not IHT, it is an Income Tax and that is going for the under 75s anyway.
QROPS allow wider investment choice than the restricted choice in the UK
UK pensions allow access to thousands of funds on low cost platforms. How much flexibility do clients need? Do the majority of QROPS clients really feel restricted by the massive number of investment funds available in the UK? I imagine very few indeed have felt restricted by choice.
QROPS provide Tax Free Income in retirement
That depends on the Double Taxation Agreement between the QROPS provider and the country where the retired person is taking an income. For example, how many UK expats retire in Dubai? Not many, yet they moved to a QROPS for a tax free income and will probably return to the UK. I suspect many will be in for an unpleasant surprise.
The argument for QROPS
A QROPS is a niche product and the advice that goes with it should be pretty niche too. The advice often needs UK advisers to work with offshore advisers with the additional input of a tax adviser, visa specialist and fund manager.
There are positive and genuine retirement and tax planning reasons for some UK expats to consider a QROPS. It would be nice to see the adverts get the reasons correct in their promotional material.
Unfortunately, the evidence is all over the internet, the quality of the information given to expats is just not good enough and this will surely be to the detriment of a huge number of expats in retirement.