QROPS real advantage?

gravlax

Tax resident in the EU for many years, over 55 and still contributing to SIPP, but will stop below risk of going close to lifetime limit.
No plans to drawdown for a few years yet, plan to take a regular income rather than lump sum. Not sure how long I will stay where I am or where I may relocate next, could return to the UK for a while, or move elsewhere within EU or outside the EU, don't know. 
I remember years ago lots of adverts for QROPS, lots of online ads. I never saw any obvious advantage.
I'd rather keep it in a UK SIPP unless QROPS provide a clear advantage?

HappyHarry

The main advantage of a QROPs is that you may be able to take more than 25% as a tax-free lump sum, there may not be any lifetime allowance charge, the annual allowance may not apply, and you would be eventually be dealing with a local "pension" provider in order to access your pension.  The jurisdiction that the QROPS is in will have a significant impact on the benefits of such schemes.

The key disadvantage is that overseas schemes may not be regulated, they may be very high cost and they may lack transparency of costs. The UK pension arena is heavily regulated and costs are low and very transparent. This may well not be the case in overseas "pension" schemes.

Years ago, the commission paid to advisers for setting up a QROPS was massive, and still can be if you use an overseas adviser. Hence the adverts.

As an aside, how much are you contributing and for how long have you been contributing since you left the UK? There are rules regarding contribution limits for overseas residents.

gravlax

Thanks HappyHarry. Very useful summary.
The option to take more than 25% lump sum isn't of use to me as I see no benefit in taking out a lump sum v having more left in the pot to last longer as monthly/annual income all at 25% tax exempt I think. Anyway, I don't need a lump sum, so unless there's an advantage to taking it, I'd rather have more cake later than binge on a quarter of it now.
Lifetime allowance charge - I don't think I'll get too close to the limit to worry about it. But worth knowing if I do. 
Dealing with a UK firm v one less regulated overseas - yes this is a factor too.

"As an aside, how much are you contributing and for how long have you been contributing since you left the UK? There are rules regarding contribution limits for overseas residents."

My UK company has made director company contributions into my SIPP. What are the rules for overseas residents that you refer to? 

xylophone

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/contributions-to-registered-schemes-for-overseas-individuals/

HappyHarry

xylophone's link above is a good one. As the contributions are made by your company, there is much more flexibility than there are for individual contributions.

bostonerimus

In my experience, as a US resident, QROPS are mis-sold and are expensive. They might be set up in places with liberal tax regulations, but you will still have to deal with the tax interaction of wherever you have the pension and wherever you live, assuming there is a double tax treaty in place. They are best avoided IMO.

dunstonh

bostonerimus said:

In my experience, as a US resident, QROPS are mis-sold and are expensive. They might be set up in places with liberal tax regulations, but you will still have to deal with the tax interaction of wherever you have the pension and wherever you live, assuming there is a double tax treaty in place. They are best avoided IMO.

Pretty much when someone says they have used QROPS, your first thought is that they have been scammed.     However, it does have a genuine and legitimate purpose.  So, it wouldn't be fair to tarnish all of them.      Just keep a healthy dose of scepticism.

bostonerimus

dunstonh said:

bostonerimus said:

In my experience, as a US resident, QROPS are mis-sold and are expensive. They might be set up in places with liberal tax regulations, but you will still have to deal with the tax interaction of wherever you have the pension and wherever you live, assuming there is a double tax treaty in place. They are best avoided IMO.

Pretty much when someone says they have used QROPS, your first thought is that they have been scammed.     However, it does have a genuine and legitimate purpose.  So, it wouldn't be fair to tarnish all of them.      Just keep a healthy dose of scepticism.

Recent legislation has removed some of their advertised advantages and while they might appear useful for some mobile expats I think they should be avoided by UK residents and even expats that are resident in countries with double tax treaties with wherever you end up retiring.

gravlax

bostonerimus said:

dunstonh said:

bostonerimus said:

In my experience, as a US resident, QROPS are mis-sold and are expensive. They might be set up in places with liberal tax regulations, but you will still have to deal with the tax interaction of wherever you have the pension and wherever you live, assuming there is a double tax treaty in place. They are best avoided IMO.

Pretty much when someone says they have used QROPS, your first thought is that they have been scammed.     However, it does have a genuine and legitimate purpose.  So, it wouldn't be fair to tarnish all of them.      Just keep a healthy dose of scepticism.

Recent legislation has removed some of their advertised advantages and while they might appear useful for some mobile expats I think they should be avoided by UK residents and even expats that are resident in countries with double tax treaties with wherever you end up retiring.

That last point is helpful. I have been trying to find any concrete advantage of moving a UK regulated SIPP to a QROP and cannot find any gains to be made.

dunstonh

I think they should be avoided by UK residents and even expats that are resident in countries with double tax treaties with wherever you end up retiring.

That is where most of the scams have taken place.

nigelbb

If you are flexible on residence & more especially on tax residence you might consider other options. You presumably are paying into your SIPP out of UK earnings to take advantage of tax relief on the way in. You will however only get 25% tax free on the way out if you are tax resident in the UK (or in another juridstiction that has similar rules). If you were tax resident elsewhere it could be worthwhile to take the whole pension pot as a lump sum. France for example taxes a pension lump sum at just 7.5% when you liquidate the whole pot.