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(Q)ROPS: A Guide to Offshoring Your Pension
At CI-Associates we guide you through the steps involved in completing the (Q)ROPS transfer process.
Transferring your UK pension fund to a (Q)ROPS may be straightforward. Even so, it’s still imperative to ensure you have the guidance of experts who specialise in offshore financial services.
Very briefly, there are two types of adviser: tied advisers and independent advisers.
Tied advisers – alternatively, restricted advisers – provide guidance on products linked to a specific company or from a restricted panel of affiliates.
Independent advisers – Independent Financial Advisers (IFAs) or whole of market advisers – work without restriction and are free to guide you towards the fund that best matches your needs and your risk profile.
CI-Associates is an Independent Financial Service Advisory (IFA)
Step 1: Choose a specialist (Q)ROPS adviser; schedule a meeting
Your adviser does not necessarily need to be physically based in the country you are retiring to. But they must be officially authorised and regulated with a licence to provide advice on offshore financial services, retirement and pension planning in that country.
Some companies deliver remote guidance using robo-advice technology. The use of this technology is becoming an established and increasingly popular feature in the financial services sector. But the better companies prefer to provide remote guidance using advanced video-conferencing technology.
The big benefit here is that video conferencing allows you to interact with real people rather than with a robot. And there is nothing like direct contact with another human being when it comes to assessing a business’s culture and credentials.
Step 2: Sign a consent form; obtain a valuation
How much is your UK pension fund worth and what is its transfer value? To find out, you need to sign a consent form, sometimes known as a Letter of Authority (LOA), authorising your adviser to contact your current pension fund on your behalf.
It could take your adviser between one to eight weeks to obtain the valuation. To speed up the process, ensure that you provide as much information and paperwork as possible. Examples include your national insurance (NI) number, your pension policy number, the name of your pension scheme and your employment details while you contributed to the scheme.
The important point to remember about LOAs is that they do not give anyone any authority to transfer your pension anywhere. LOAs merely give your adviser the authority to request a valuation and transfer documentation.
Step 3: Digest the report; understand your options
Once your valuation comes through, your adviser can start talking you through your best options in the form of a full proposal. Ideally, his or her advice should be supported by a personalised report that should cover:
A full analysis of your existing benefits
A comparative analysis in a (Q)ROPS that addresses assessment factors like the Lifetime Allowance (LTA), tax, income in drawdown, succession, etc.
Your risk profile
Your objectives and requirements
The recommended jurisdiction
The (Q)ROPS provider
All fees and costs.
Your adviser will use your report to guide you through your options before giving you recommendations in a formal advice record. You are then free to consult the proposal and the advice record to ensure that you have all the information you need to make the most informed possible choices.
Step 4: Finalise your decision; complete the application
Once you have decided to proceed, your adviser will guide you through the application process and complete the relevant documentation and paperwork. Again, the more documentation and paperwork you can provide, the better. Yes, there is a lot of paperwork involved. But that is because you are obliged to meet all regulatory requirements, which means you will need to provide a copy of your passport, proof of residence and so on.
Step 5: Set up your (Q)ROPS; define your investment strategy
Processing your paperwork, setting up your (Q)ROPS and transferring your UK pension fund can take from four to six weeks. (Q)ROPS transfers must go through several levels of compliance and due diligence before any money is transferred.
Be aware: your money will never be paid to your adviser. The (Q)ROPS transfer only takes place between the two pension institutions involved.
At this point, you can start discussing your investment strategy with your adviser. This involves deciding on the best way to make sure that the value of your pension grows in line with your retirement needs – and personal ambitions. Two words to bear in mind here are ‘diversification’ and ‘fees’.
When it comes to fees, the cheapest is not necessarily the best. Instead, aim to achieve the best value and measure cost in relation to your funds’ reputation and strategies, and the returns they achieve. As for diversification, this is about not putting all your eggs in one basket. In other words, ensure your adviser doesn’t invest your precious pension pot in one fund, one asset class or even in one country or currency.
Under (Q)ROPS, you are free to invest your money just about anywhere you choose. But using a free rein with full independence is not always the best approach. Instead, always follow a sound investment strategy. Using model portfolios and a discretionary fund management approach are two good examples. Among other questions, ask your adviser if his or her organisation has an investment committee and who approves the investment strategy for their clients.
Another point to bear in mind is the importance of regularly reviewing your investment strategy. The investment markets can be scary places, even for financially savvy people. Your personal circumstances are likely to change and the markets even more likely to change. To ensure your investment growth keeps up with your aims, your CI-Associates adviser will meet with you at least twice a year and provide you with quarterly valuations.