Qrops flexible investments explained
QROPS providers and financial advisers often talk about the flexible investment potential of an offshore pension – but what exactly does this mean?
Finance professionals draw attention to the investment restrictions of an onshore pension.
Generally, most UK pensions have limited investment opportunities often limited to funds offered by the provider.
QROPS investment managers can remove many of these shackles by offering a wider range of currencies and investment options.
Inevitably, these are limited by the trust governing the QROPS, but the underlying HM Revenue and Customs rules forbidding investment in taxable property still apply.
QROPS and residential property
A QROPS is not allowed to hold taxable property at any time – not just the first five years from when the scheme is established.
If HMRC uncover a QROPS that breaks this rule, unauthorised payment charges are levied on the fund – and these are generally at least 55% of the fund’s transfer value.
The QROPS provider can also face sanctions, including having the scheme struck off.
Taxable property is residential property and assets like art, wines, jewellery, and antiques.
The intention is not to let QROPS investors enjoy any personal benefit from their retirement savings investments.
Managing your own QROPS investments
Self-management of pension funds is also an option, along the lines of similar schemes in the UK like a self-invested pension plan (SiPP).
Several degrees of fund management are allowed, ranging from full management by the provider to full self-management by the saver.
Not all schemes allow self-management by the investor, so anyone wanting to influence their QROPS management should seek out a scheme that allows them to participate.
Contributing to a Qrops pension also has flexibility. Qrops pension investors can also still contribute to their funds after a transfer – and so can their employers. The contributions do not attract UK tax relief and are subject to the pension rules of the country where they permanently live.