QROPS Should I Transfer My Final Salary Pension Scheme?

By: Santiago Holder

Let us get one thing straight right from the start. QROPS transfers are a good thing, but they are not suitable for everyone. You must take sound advice before committing to a QROPS transfer.

The subject of final salary transfers is a taboo subject. This is because of the bad advice given during the 1980s. Which resulted in a great financial loss to many people, notably ex miners, teachers and nursing staff. What shocked the nation most of all was that the advice came from household named insurance companies and high street Banks. Worst still it was backed by the UK government with an advertising campaign highlighting the benefits.

Ever since this episode in the 1980s the subject of final salary transfers is met with the stock reply, that if you are in a final salary scheme then there is no benefit in a pension transfer. Working in the industry during the 1980s and the 1990s I agree with this stance as 99% of all cases I came across it was the case that a pension transfer would leave the client worse off.

However during the naughties 2000 to 2009 things began to change significantly. With interest rates, and annuity rates going into freefall. This trend continued into the new Millennium. Interest and annuity rates have a direct effect on final salary transfer values. If the annuity rate goes up then transfer values go down. If annuity rates go down transfer values go up. The Bank of England's policy of printing money, given the quaint name quantitative easing has lead to the lowest annuity rate since records began.

The result of this is that by August 2012 the average final salary transfer value had doubled compared to 2008. This means that you get 250,000 as a transfer value were four years ago it would have been only been 125,000. If you are over age 55 this means you can take a TAX Free Cash lump sum of 75,000. (Up to 30% of the total transfer value.) This could be up to double what you would have been able to take from your company scheme.

This produces a very strong argument that anyone who is in a Final Salary Pension Scheme and no longer living in the UK, or who is looking to leave the UK, should consider a QROPS transfer. As the economic conditions in place will now give you a transfer value far larger than would be the norm. It is also rumoured that given the problems encountered by Final Salary Pension Schemes the UK Government is considering legislation that will allow Final Salary Pension Schemes to reduce the transfer values. So now is the time to act.

But a word of caution as a QROPS transfer will not be suitable for everyone. All UK Final Salary Pension Schemes are different. With regard to the benefits you will be giving up, and the guarantees contained in the scheme. However for many a QROPS transfer will be the key to a far greater pension income, given the current very high transfer values.

For your protection the FSA has made it mandatory that any advice given by an IFA on a Final salary (Defined Benefit) pension transfer must be undertaken by a G60 or equivalent certified advisor. Unfortunately there is no legislation in place to ensure that QROPS providers only accept transfers of Final Salary Pension Schemes from suitably qualified G60 advisers. This leaves a gap for the unqualified to exploit. Given this it is in your interest that you only seek advice from a suitably qualified G60 adviser. Sadly the number of G60 qualified advisors is very few. Once you look for a G60 qualified adviser who specialises in QROPS there are hardly any. There are moves to ensure that in the future only G60 qualified advisers will be able to advise on a QROPS transfer. However in the mean time only seek advice from a G60 qualified adviser. This will ensure that your adviser has at least five years experience, and is fully qualified to advise on a pension transfer.

Another issue to consider when dealing with an IFA, is one of expertise in this subject. You need to understand that QROPS will only be a small part of the firm's business. For the most part they may be dealing with mortgages and household insurance. And will have very little knowledge if any of international tax, investment, or currency exchange issues. QROPS is an international financial instrument. Your money will no longer be in the UK, and as such needs to be looked after by someone who specialises in international Finance. Once invested will your adviser be up to task of looking after an international investment portfolio?

Ideally you require the services of a Personal Portfolio Manager, who is conversant with offshore Personal Portfolio Bonds. If possible choose a firm who can offer this service. A QROPS transfer is not just about transferring your pension to an offshore jurisdiction. Once invested your money needs to work hard to increase its value, to be able to provide your income in retirement. Make sure that the firm you chose is capable of undertaking this important part of the job. Only chose a firm who specialises in QROPS pension transfers, with advice being given by G60 or equivalent qualified advisors. Also make sure that they are fully conversant with international investment.

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There are companies out there who can meet all the above requirements. QROPS Final Salary Transfer information www.waterstone-investment-associates.com/#!qrops-usa

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