Business & Finance Finance

Qrops, Don"t Ignore the Taxman"s Wealth Warning

When the government prints a wealth warning on the list of QROPS providers open to transfers from UK pension schemes, then it's a message you ignore at your own peril.
Every month, HM Revenue and Customs updates the list of worldwide QROPS (Qualifying Recognised Overseas Pension Scheme) providers and adds some riders that are designed to make anyone opening a QROP scheme sit up and pay attention.
The list is available for download in Adobe Acrobat PDF format from the HMRC web site.
The list includes about 1,500 QROPS schemes from across the world.
This is what the disclaimer is saying to you as an investor:
  • Providers are on the scheme by consent, so not every provider is listed.
    This begs the question of how do you know if a scheme is not a scam if the details are not on the list.
    That's down to the fund managers of your current pension scheme.
    They are not allowed to transfer a penny to any scheme that is not an authorised QROPS.
    If the scheme you want to join is not on the list, then your current pension provider has to get a letter from the QROPS fund manager of the scheme they are transferring to giving permission for HMRC to confirm the provider has told HMRC that their scheme meets all QROPS provisions.
    For transfers from multiple schemes, each current fund manager has to do this.
    If they transfer your money without this confirmation and the scheme is not a QROPS, then the transferring fund manager is in breach of the QROPS rules and that can lead to sanctions against his firm and an authorised withdrawal charge penalty against you.
  • None of the providers on the list are approved or recommended in any way by HMRC HMRC regulates QROPS schemes but will not give advice, hints or tips about investments.
    QROPS are 'buyer beware' products.
    Investors and their advisors are expected to make all appropriate due diligence inquiries before committing themselves to any contract.
    Providers notify HMRC that their schemes meet all the requirements of a QROPS scheme but HMRC does not verify the notification.
    Watch out for any financial advisor or provider selling 'HMRC approved' schemes because there is no such thing.
    The transfer could also give rise to a scheme sanction charge on the scheme and to an unauthorised payments surcharge on the member.
    This is why you should look for QROPS advice from a UK regulated independent financial advisor with experience in offshore pensions.
    The advisor should also have no 'ties' or affiliations with a limited number of QROPS firms - best advice comes from an advisor who can shop round the 'whole of the market' for a tailored scheme that suits your needs.
  • What is an unauthorised payments surcharge? An authorised payment is when money is paid out of a pension scheme in a way that breaks the rules.
    Examples are paying money in to account that is not a QROPS scheme, paying more than the allowed tax-free lump sum or paying benefits to a pension scheme member before they have reached retirement age.
    An unauthorised withdrawal charge can also be applied if money is transferred to a QROPS then transferred on to a non-QROPS scheme.
    The potential penalty is 40% tax on the unauthorised withdrawal plus a 15% surcharge penalty.

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