A Personal Finance Guide

Beware – Not All QROPS Are Created Equal

Once it has been demonstrated that there will be a benefit in transferring your existing UK pensions to a QROPS. There is now the process of choosing the most beneficial structure that will maximise the returns on your fund. In reality in the majority of cases, the size of the transfer is the overriding factor that will dictate the structure of the QROPS. This is normally simply restricted by operating costs of the receiving scheme. This is why you will see minimum transfer values of �250,000 or �100,000 talked about.

Whatever fancy names the providers come up with for their own schemes. There are basically three structures available:

1.Managed QROPS. This usually offers a single Fund Manager. Quite often the norm being in house managed funds. This may range from four to as many as several hundred funds.

2.Professionally Managed QROPS. Offering a far wider range of Funds, from several hundred to as many as a few thousand. This will however be a selection approved by the QROPS provider.

3.An Open Architecture QROPS. This structure within reason allows for a choice from any Fund Management group. Also allowing for virtually any asset to be held within the structure, including Residential Property, and Private Company Shares.

Structure 1. This is adequate for a small to medium transfer value. It is possible to secure transfers from as little as �25,000. However at this transfer value, it is difficult to find a QROPS provider at a realistic pricing structure.

Structure 2. This is ideally suited to a medium size transfer. It is possible to secure transfers from as little as �50,000. But the majority of schemes will require a minimum of �100,000 to gain access to this structure.

Structure 3. This is the ultimate solution, given the flexibility, and additional potential from the structure. It is possible to secure transfers at as little as �100,000. However normally you will need a minimum transfer value of �250,000, to enable a transfer to this particular structure.

If you can gain access to The Open Architecture structure at a favourable charging structure, this will always allow for the greatest potential return on your investment. This is where your choice of advisor is very important. As a truly independent advisor will be able to gain access to the best structure for your QROPS transfer, only limited by negotiation on charges. However in reality a great proportion of �100,000 plus QROPS transfers are being transferred to a Professionally Managed QROPS and not to the more favourable Open Architecture QROPS. Note that subject to exit charges, if it would be more beneficial to move your existing QROPS to an Open Architecture QROPS, you can. QROPS to QROPS transfers undertaken in the best interests of a client can work very well. As with any investment diversity is the key to security and higher returns.

I f you have transferred your UK pensions to a QROPS or are considering the option. Make sure you get the best possible solution for your transfer. Over the last year far more QROPS providers have come into the market. On the one hand this is good as it has driven pricing down. If you know where to look or have an adviser who is willing to negotiate lower charges on your behalf, there are some very good deals out there. But beware the lowest priced QROPS can in fact be the last thing you want.

Example: QROPS provider A charges a flat fee of �300pa with a choice of 500 in-house funds to choose from. On your Transfer of �100,000 QROPS provider B charges a 1%pa fee plus an additional 1% management fee, on an Open Architecture QROPS, were you are free to choose any asset holding.

What you see is the charges as follows:

Option A: �300pa

Option B: �1,000pa plus an additional management fee of �1,000pa increasing every year as your investment grows.

So you decide to take option A.

Slow down! What provider A has not told you is they have a 7% fee buried in fund spreads within their fund range. Whereas provider B allows you, or your adviser to chose your assets. And it is possible to get your fund placement costs down to 0%.

What an experienced adviser sees is:

Option A: �300pa plus an additional cost of �7,000 in the first year, plus an additional �2,000pa in fees buried in the fund costs. With a fund selection that is mediocre and producing mediocre results.

This compares to option B: �1000pa plus an additional management fee of �1000pa. With an open market option on your fund selection, allowing you to chose the best performing funds.

Yet how many of you out there have option A.

Have a comparison of your existing arrangement undertaken, by an independent adviser, to ascertain if you truly have the most beneficial solution in place. If you are then presented with an alternative, evaluate it. Work on a very simple premise. If the formulated solution can be demonstrated to improve your position, then run with it. If the formulate solution cannot, then don’t. It is as simple as that!

But do remember that not all QROPS are created equal.

An independent adviser will be able to negotiate preferential charges on your behalf, gaining access to solutions you would not be able to access on your own.

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

http://www.oiiaglobal.com