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Solving the Qrops question

HMRC might want to consider a new name for Qrops, given the growing belief that these offshore plans are the next misselling scam waiting to happen.

Perhaps they should rebrand them MQPROPS – maybe qualifying, possibly recognised overseas pension schemes – because the current name does little to dampen down the wild claims that some offshore advisers and providers are making about these schemes.

The loss of the Beazley scheme’s Qrops status does pose some questions for the way HMRC currently operates. If, as is being suggested, status has been lost because Hong Kong’s domestic legislation would have meant a Qrops could never technically have existed in the first place, then that does not bode well for all the other schemes in the jurisdiction.

But if that is the case, why should it take so long to come out? I can understand HMRC saying it is not its job to confirm that the laws in every tiny island state in Micronesia are Qrops-friendly but surely it should have figured out where it stood on Hong Kong a long time ago.

Beazley has written to its clients, saying its lawyers have managed to get what it described as an “entirely unprecedented and genuine offer” from HMRC that wherever transfers into the scheme were made in good faith, unauthorised payment charges will be waived. HMRC may be hard-nosed in many situations but I think most of us would have expected it to adopt this position, as it did with investors in Freedom Sipp after it collapsed last year.

As with Freedom Sipp investors, those Beazley scheme members looking to use Qrops arrangements for their intended purposes should get out, alth-ough they will suffer advisory and product costs as well as the inconvenience and delays of an HMRC investigation.

But where advisers have tempted clients into schemes on the basis of inaccurate claims of fund flexibility, trouble lies ahead.

UK investors may report their advisers to the FSA but those who have used advisers based offshore will find recourse harder to achieve.

We do not yet know how much Beazley is the tip of the iceberg. Of course, there are benefits to Qrops schemes and anyone genuinely emigrating can gain advantages by taking one out, provided they use a decent adviser that puts their money with a decent provider.

But the anecdotal evidence suggests there are as many sharks out there as decent operators and any client tempted by the promise of bucketloads of tax-free cash could risk losing a serious chunk of it to charges.

One source has reported seeing a Lichtenstein scheme charging £250,000 for the transfer of a £1.4m fund. Surely you would only make such a transfer if you seriously believed you were going to get your hands on the whole lot.

If ever there was a case of the tax tail wagging the financial planning dog, then Qrops is, in many cases, it. Advisers I speak to talk of individuals being transferred from rocksolid final-salary schemes, public and private sector, into Qrops schemes, with scant regard for the suitability of transfer values or the understanding of loss of benefits. Once funds are transferred, in many cases, they are invested in funds that do not benefit from the trans-parency taken for granted by those investing in the UK.

With way more than £1bn of assets likely to have left the UK to Qrops since their introduction in 2006, HMRC knows it needs to do something and the review of the annuit-isation process is likely to reduce the pressure by making staying at home more attractive. In the meantime, advisers need to handle Qrops with kid gloves.

John Greenwood is editor of Corporate Adviser

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. The QROPS enquiries I receive from my websites come from some very surprising places. Anybody want them?

  2. Never have been entirely comfortable with QROPS but this is almost exclusively down to the tactics I have seen to sell them. All the enquiries I have seen have been looking to “bust” and consequently I have done none. There must be some potential clients out there that it actually suits, sure, I’ll take them off you

  3. Correctly advised QROPS does not pose a problem but sadly overseas clients are still willing to take advice from unqualified overseas “advisors”. I must admit I come across very few clients wanting to bust their schemes. Happy to take enquiries, I am MiFID regulated, Stuart@kuberawealth.co.uk

  4. The Beazley case simply illustrates the need to (a) check your advisers qualifications (b) check they are giving advice and not execution only so they can be made accountable and (c) that the Trustee used for a QROPS is actually understood. It never ceases to amaze me how many QROPS are done involving Trustees that no one has ever heard of and you cannot understand the structure of the company. Frightening.

  5. I have only ever spoken to one person (BS) who actually really understands how QROPS really works and I am not including John Greenwood who quite clearly does not know what he is talking about.

    Of course, there are benefits to Qrops schemes and anyone genuinely emigrating can gain advantages by taking one out, provided they use a decent adviser that puts their money with a decent provider.

    As opposed to warning people off QROPS, please set out what the advantages are.

  6. How many qualified offshore advisers are there out there? Very few, I should imagine.
    A few may have the Financial Planning Certificate, but anyone reading the RDR plans for benchmark qualifications will see that this is to be relegated to a “level 3” qualification. Thus being suitable for support/admin staff and not advisers.
    There cannot be many G60/AF3 advisers out there in the offshore market to advise clients on pension transfers.

  7. I find these comments interesting.

    As you can see by my email address – we specialise in QROPS indeed the Revenue called us in to assist with their FAQ’s which you will find at

    http://www.hmrc.gov.uk/pensionschemes/faqs.htm

    Here you will find some of our pearls of wisdom – note the reference to experience and knowledge!!

    I have been involved with QROPS before they even became QROPS – check the Times 16/11/96 – when we predicted a mis-selling scandal then in the article “Pensions Mis-Selling Both at Home and Abroad”

    We even appeared before Parliament in Australia – in 2002 – well before QROPS

    http://www.aph.gov.au/Senate/committee/superannuation_ctte/media/17may.pdf

    so we do speak with Authority.

    All pension advice today must involve a QROPS as it is an option for all UK Residents and I defy anybody to argue that point – i.e. if it’s an option it should be considered. I dare say maybe a couple of advisers in UK are doing so. We all must !

    The advice will of course be “light consideration” if the factfind is of the expected high quality and no indication of overseas residence potential or actual is apparent.

    However if any indication of overseas residence is present then to treat the customer fairly QROPS must be considered – and there must be “high consideration” of QROPS if there are indications of future non-UK residence. Are we not dealing with long term planning – if so we must think long term with our clients?

    Financial Planning is about

    RIGHT MONEY
    RIGHT PLACE
    RIGHT TIME
    RIGHT PRODUCT
    RIGHT PROCESS
    RIGHT JURISDICTION
    RIGHT CURRENCY
    RIGHT AND TIGHT COMPLIANCE
    RIGHT TAXATION CONSIDERATIONS

    QROPS are no different – they are here and they are here to stay – we must adapt and embrace. To ignore is dangerous – as QROPS are right for some but not all.

    My view is simple – if you cannot deliver quality factfinding that demands serious QROPS consideration then are you fit to advise the client where a QROPS is demanding high consideration? The quality advisor will want the best for the client and bring in an expert.

    This subject is not about execution only – this is about high advice and its high fee – its not low advice – extortionate fee. These cowboys need to be exposed and fast and the FSA and FOS need to set out guidelines.

  8. 95% of the work involved with a QROPs case is down to the QROPs trust, but 95% of the profit is down to the portfolio bond which the majority offshore advisors use to invest the pension assets, generating somewhere between 8 and 13% + up 3% management “fund advice” charges. The level of the advice being given is one thing, but the more worrying factor is the fact that the big names insurance / fund managment companies actually choose to sanction th epoor levels of advice being given, by accepting the busienss and paying these outrageous commissions.

    I agree 100% with Geraint Davies, that QROPs needs to be considered, however, there is no current compliant or robust process for ensuring that a QROPs sale has been considered and treated correctly. If any advisor is able to offer QROPs advice / recommendations and is covered by a recognized PI cover, then I will gladly refer my clients over so that they can be advised correctly.

  9. It seems to me that part of the problem with poor advice is due to HMRC and the opaque way in which the rules are established.

    I think that the 5 year reporting period has been the trigger for all sorts of conflicting advice.

    Either HMRC should extend the 5 year reporting period considerably to stop pension busting or make it clear that it after 5 years pension holders are free to do whatever they wish with the funds without fear of retrospective taxes if the QROPS rules of the country in question allows it. After the Beazley case, there are going to be a lot of very worried expats and also worried advisers who have recommended pension busting.

    Also, I think the the list of HMRC recognised schemes is misleading. The list clearly makes the point that the fact that a schemes that is listed should not be taken as a recommendation. But do clients really read this? I have seen loads of websites that imply that being on the list means ” full HMRC” approval. Surely HMRC should do something about this confusion. Perhaps fully audit the schemes on the list so that the public can rely on it and not have to hope that their particular provider it is not removed in the future.

    Taking account some of the comments on this thread, perhaps trustees should only allow transfers from DB schemes provided that they have evidence that the clients’ advisers have specific pension qualifications.

    For the time being, I think anyone that wants to take out 100% cash from their QROPS should have a long hard think about this before acting.

  10. The sooner regulations are put in place on QROPS pension transfers the beter.

    Non UK IFAs aer not regulated however if HMRC restricted transfers to firms with only G60 or equivalent certified advisers, problem solved.

    John CII G60 Qualified

    http://www.pension-transfers-qrops.com

  11. HMRC can not restict QROPS transfers to G60 advisors – HMG can as could the FSA. Will they, hell no, thats too obvious……………..

  12. I found the posting of Gerraint Davies very helpful, but that of Anonymous | 21 Sep 2010 6:20 pmtotally unconstructive and offensive to John Greenwood.
    There are legitimate concerns that people may be transferring using QROPs for innapropriate reasons and with limited or NO advise.
    I am aware of QROPs and have to be as some of teh employees of the GPPs we operate are foreign nationals, resident and working in the UK, To date, those who have paid up GPPs are all relatively yound and there funds are modest and single charged, so there is a possibility of return to the UK for work, so I explain the existance of QROPs schemes and that the costs involved in obtaining advice and then transferring may outweigh the benefits, particulalry in view of theri age and the liklehood they will become employed in the UK again in the future. I would not dream of providing teh actual advice or carrying out the transfer myself and the useful thing about things liek Moneymarketing is seeing postings from people like Gerraint who make sensible postings and hence give us a name of someone we might want to research a little further before passing across a client to a specialist. With Anon’s posting, I don’t know who to avoid like the plague which is a pity as I certainly would not want them advising my clients if they make comments like that.

  13. Offshore Adviser 2 5th November 2010 at 10:12 am

    Phil Castle – the offshore advisor is absolutely correct about the standard of QROPS advice. I am extremely active in the offshore market, both from the UK and various other locations, mainly in Africa and and Asia. Advisors have only one incentive where QROPs is concenred and that is the 13% commission that can be earnt. The bigger issue is the investement providers providing the ammunition for these to be fired in the form of allowing portfolio bonds to be used for such investments. Eventually the cowboy advisors dissappear, the client has no where to go and the stupid trustees who wrote all those disclaimers to cover their own backs about the investment route and advice will be left holding the can.

    The only solution for QROPs is to ensure that clients have advice and recomendations directly from a qualified TRUST advisor and that the investment solution for the money is approved and not a vehicle to rape up to 13% commission from the investment solution.

    Interstingly QNUPs is becoming a better solution but you will not find many advisors promoting QNUPs as there is little chance for raping the commission out of the pot.

    QROPs is important and correctly sold is beneficial, but advisors making comments such as “I wouldnbt advise on it” are just shifting the problem.

    1. Understand the Trust
    2. Understand a solution
    3. Stop raping the commission
    4. Be big enough to advise the client to take independant tax/trust and legal advice
    5. Establish a minmuim amount that is viable for QROPs. I am still seeing QROPs being set up for funds less than £50,000

    I am still trying to understand a reason for a person with more than 5 years to go until retirement to move into a QROPs.

    One of the favoured arguments by offshore advisors is that client s will be able to have a wider choice and spread of investments. Really,……..I thought that was why advisors charge admin fees to take that responsability away from the clients.

    Phil Castle, with respect, you need to find out who you can trust becasue it has taken me about 2 years to fund such a firm. I am happy for the moderator to forward you my email address if you would like to communicate to me directly

    Find a Trust firm that understand the options.

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