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Warning! QROPS Scams – How Do I Avoid Them?


QROPS Scams | The HMRC QROPS Fraud Squad

QROPS Scams – This article looks at QROPS scams and now to avoid them. HMRC have helpfully set up an HMRC fraud squad to deal with the issues. Thankfully, most of the QROPS scams have disappeared now that HMRC tightened regulations in 2015, the main issue is to look out for unregulated funds which can cause issues, however that is an issue of the liquidity of those funds, not the QROPS structure itself, which in most cases is fundamentally sound and built around the same rules UK pensions face.

“The Government has set up a specialist unit to look into transfers of pensions into QROPS due to concerns about fraudulent activity and irresponsible transfers, if not QROPS scams. Mis-selling of QROPS have been reported, but it seems to be in the minority.”

HMRC has set up a specialist fraud squad unit to handle QROPS transfers after problems in Singapore and Hong Kong. Currently, NZ used to offer a QROPS scheme which financial advisers are promoting as allowing you access to 100% of your pension as an upfront lump sum payment after 5 years offshore if an expat is over 55. The spirit of a QROPS scheme typically is to allow only a 30% lump sum and the rest of the pension must be used to provide a pension income for life.

However, since HMRC’s clampdown, the QROPS arena is much safer. Most jurisdictions have now fallen in line and QROPS scams are falling off. Australia, New Zealand, Malta, Isle of Man and Hong Kong have all tightened up their pension regulations to fall in line with HMRC’s new ROPS rules.

The specialist QROPS unit is a sub-division of the Anti-Fraud Unit. An HMRC spokesman says the unit, contained within its pension scheme services department, works with members of the Pensions Regulator and the Financial Services Authority (FSA) in the UK.

It is not surprising that HMRC is scrutinizing schemes. we’ve heard stories of financial advisers taking large upfront commissions to cash in a client’s pension, leaving them with little to retire on.

In the past, some offering QROPS were bending the rules in the industry, which is a shame as a proper ROPS which follows HMRC rules is perfectly legal. There were many innocent advisers working with QROPS providers in other countries who were not aware what the QROPS providers are doing.

However, in 2015, HMRC really started to clampdown on any QROPS scams and now we would argue that QROPS are safer than many UK SIPPs which allow many unregulated investments as you can see from this HMRC alert about SIPPs. Unlike SIPPs, a QROPS has to sign off on every investment, which means both your financial adviser and your pension trustee must sign off on any investment decisions giving two levels of due dilligence to reduce risk.

QROPS Scams | QROPS Singapore

In 2008, the Inland Revenue (HMRC) deregistered all Singapore-based QROPS, leaving members with a possible 55% clawback on their pension pot. However, the pension members won the court battle and have paid no extra tax on their UK pension transfers to a QROPS. But, the Singapore QROPS industry now remains closed to new members thanks to the costly court case.

Last year, HMRC revoked the status of a Hong Kong based scheme as it failed to meet the necessary criteria. However, it was re-registered and now Hong Kong ROPS are amongst the most popular jurisdictions to transfer your pension to.

QROPS Scams | QROPS NZ

Most issues in New Zealand concerning QROPS have now been resolved and New Zealand is open for business as usual. In fact with their tight regulatory system, New Zealand is one of the safest places to park QROPS monies. Most QROPS in New Zealand are pooled and have a discretionary fund manager who looks after the investments. You can read more about how QROPS in New Zealand have changed here, How QROPS in NZ have changed.

Avoiding QROPS Scams

How do I avoid a QROPS scam?

The safest jurisdictions for QROPS transfers are Australia, the Isle of Man, Malta, Hong Kong and New Zealand who have to adhere more strictly to HMRC’s rules and have local pensions’ regulators who supervise them. Contact a QROPS specialist to avoid fraud and make sure there aren’t any unnecessary retrospective tax charges on your pension transfer(s).

New Zealand, Hong Kong, Malta and the Isle of Man transfers are allowed and will help to reduce your taxes in many cases as well as help manage currency fluctuations affecting your pension income . If you have multiple homes in the UK, you can also help to shelter them from inheritance tax through transfers into Qualifying Non-UK Pension Schemes or QNUPS, although this needs careful consideration as it is effectively moving your pension into a pension scheme with all the rules that go along with it.

Whilst there seems to be few reports of QROPS scams as far as pensions being transferred and the client losing their entire pension, wrong and irresponsible advice has led to clients’ pension monies being frozen as well as tax clawbacks wiping out substantial parts of their pension. For responsible, ethical advice, please send enquiries to a QROPS specialist in order to protect your pension as well as make sure your transfer complies with HMRC rules and the spirit of the law.

Also, make sure all your investments are listed on regulated exchanges such as the FTSE or S&P500. Here is a useful article from the money advice service on how to avoid high risk, unregulated investments. A QROPS specialist would also be able to help navigate risk for you and diversify your portfolio to contain the correct stock/bond mix for your risk profile.

You can read HMRC’s warning here on pension transfers and which transfers are acceptable, i.e. QROPS.

Click here to contact us if you want advice on legal QROPS transfers.

QROPS Scams article by QROPS Specialists

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