I have a QROPS… have I been scammed?

A QROPS is a regulated pension, not a scam

If you have a QROPS then you hold money in a regulated pension, not a scam. That should ease you a little. Second, though, you should certainly have your pension reviewed by a regulated adviser.

Check your adviser’s regulation on our international regulator directory or get in touch with us to refer you to a regulated expert.

Does having a QROPS automatically mean I’ve been scammed?

No. QROPS are regulated overseas pensions, which are recognised by Her Majesty’s Revenue and Customs (HMRC).

Proper QROPS planning advice can result in a much improved long-term financial plan, with great member benefits and retirement income flexibility. However, for some, a QROPS has resulted in a complex, expensive, and unnecessary change to their pension.

QROPS have unfortunately been an easy target for scammers over the years so it is certainly important to check on your pension, specifically on your investment portfolio. If you have a QROPS in place, it can be improved by ensuring the investments are working correctly.

Dangers of poor pension planning advice

A pension should only be switched, or transferred, if it is in the best interest of the member. Unfortunately, overseas residents have been an easy target for financial salespeople selling the (often untrue) benefits of QROPS.

Over the years, we’ve dealt with pension members who have been told a myriad of mistruths.

QROPS are not income-tax free. They are not fully shielded from death taxes, and they do not mean that your pension is going to grow by a guaranteed rate.

Whatever you were told when taking out a QROPS, ensure you understand the regulation and tax laws now. HMRC and the UK government have taken a close look at QROPS and ‘delisted’ some schemes and entire jurisdictions.

Overseas tax authorities note cross-border pension income in their publications and some take interest in overseas pension income, lump sum and death benefits. Ensure you understand the tax laws in both the jurisdiction of the QROPS, and where you live, before taking withdrawals.

QROPS are best suited to those not returning to the UK for retirement.

If you live in the UK and hold a QROPS, you could be facing years of cross-border income tax reporting and onerous pension management.

Dangers of taking unregulated investment advice

Unregulated financial advice is very dangerous in all its forms. In many cases, unregulated advisers were counted by financial product providers as ‘introducers’. They wouldn’t ever consider themselves scam artists, because they are legally allowed to introduce customers to a new pension.

Essentially, introducers are marketeers and not advisers

They have no qualification requirements or need for insurance or regulation. You may have been provided with a short report or guidance information from an overseas ‘adviser’. If this was from an unregulated adviser, you’re basically making the decisions for yourself. That way, you may have no one to blame (or rights to a claim) if things went wrong.

Unregulated advisers/introducers are offered huge commissions for ‘churning’ investment portfolios from one strategy to another. Financial commissions – i.e. product payaways to introducers, can be considered a financial incentive to do the wrong thing to a client’s portfolio. A financial commission incentives can result in questionable portfolio switches. In some cases, a new investment structure can trigger a new fixed charging structure.

Poor portfolio management results in a pension member suffering high costs and ultimately poor performance. In some cases, QROPS have been mismanaged, resulting in entire losses over pension pots, leaving the member limited rights to complaint. If the advice you received was not regulated, it was probably not insured either.

Questionable ‘tax planning’ benefits are often overhyped

Pension advisers shouldn’t pretend to be tax advisers. Only specialist accountants and tax advisers should give any tax advice at all.

QROPS are highly complex products which are typically taken out by individuals with complex situations.

QROPS transfer taxation has recently been introduced to prevent aggressive tax planning tactics and have greatly reduced the popularity of QROPS. You must now live in the jurisdiction of the QROPS in order to transfer your pension funds without attracting tax. For this purpose, the EU counts as one jurisdiction.

Cross-border pension income means your money is essentially liable to taxation in both the country where the QROPS is based, and where you reside. Unless you live in a jurisdiction with a favourable tax treaty, its likely your income will be taxed.

What are QROPS provider firms doing about it?

It is important to note that QROPS provider firms are not scam operators. Their job is to administer the pension for the benefit of their members. They usually charge a fixed annual fee to run the pension.

QROPS providers don’t get involved in your personal planning and don’t have permission to change your pension investments.

You may approach the QROPS provider for information, or give them instructions to change your plan, but they wouldn’t be able to advise you of what to do with your money.

QROPS provider firms are certainly cleaning up their act. They are tightening their rules on who can offer advice to QROPS members and increasing their checks and due diligence on intermediary firms. We’ve had a huge amount of enquiries from ‘stranded’ pension members, whose unregulated advisers have suddenly disappeared from a tightening global regulatory system.

The Maltese regulator, the MFSA, have taken their QROPS review seriously. The MFSA have recently ensured that unregulated advisers cannot make changes to investment portfolios. While this has been positive, it has also resulted in a lot of orphaned pension clients with little understanding of how their plan works.

What you should look for in your QROPS

Ask for a pension benefit statement and a schedule of information, not least:

  • Who your pension provider firm is – the ‘trustee’
  • The current value of your pension and any exit fees applicable
  • Details of your annual QROPS fees
  • What any future income drawdown and withdrawal fees will be
  • Who is nominated to receive pension death benefits
  • Details of investment structures held within your QROPS
  • A breakdown of the investment portfolio
  • Factsheets for all investment holdings
  • A full breakdown of all costs being deducted from your pension fund
  • A full statement history of your plan, showing all financial transactions within your pension since your UK pension funds arrived
  • Any commissions being paid to a financial adviser
  • Details of any linked ‘intermediary’ firm authorised to make changes to your plan

To best research your plan, use our free toolkit. Read more about QROPS and the risk of scams in our free guide.


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