Pellicano Articles
The question we want to address for a UK expat is to consider and contrast the safety of a UK pension fund relative to the safety of a fund that has been transferred to a QROPS.
The question of safety can be considered in a number of ways. One way is to look at the pension policies that expats have left behind in the UK and what has happened to them subsequently. Not only do we see a straightforward erosion in value because of “investment neglect” but also, the ongoing charges associated with these policies adds to the consequences of what can be described as “the ostrich approach”.
Most defined contribution (money purchase) and personal pension policies are likely to be invested in what are called either a “with profits” or a “managed” fund. Where there is a wider exposure to specific investment funds there is often no process of review in place. Although these funds are “safe” in the sense that there is no risk of the fund being raided “Maxwell style”, they are often at risk because of neglect.
The average “neglected pension pot” of these types is often under £100,000 in value. When the numbers are much more than that a more pro active approach is often (but not always) in place. Too many people have absolutely no idea of what the value of their pension funds are worth yet at the same time they have businesses that are finding it difficult to cope in this economic climate. Therefore, the discovery of funds in a pension pot can come as something of a surprise. To be able to release a lump sum from this fund can come as a great relief. To them there is more safety in their long term future if they are able to safeguard their business interests.
UK pension funds are “safe” in the sense that they are either going to be with an institution such as a pension trust company or are in the safekeeping of trustees if the scheme is one operated by a previous employer. QROPS funds are held by trustees for the benefit of the QROPS member. One of the New Zealand QROPS that may be used is in the form of a trust fund established originally by an Act of Parliament in 1884, so that seems pretty safe in terms of the safekeeping of the QROPS assets. New Zealand QROPS enable capital to be released from a pension fund so quite often the fund is not held there for more than a few days before falling into the control of the QROPS member.
The safety of funds held in UK final salary (defined benefit) company schemes is a far more complex matter. The security of the promised pension benefit upon retirement at a future date many years hence must depend on the ability of the business operating the scheme to ensure that the fund will be able to meet its future liabilities.
However, in harsh economic times businesses are looking to cut costs and reducing pension funding costs comes pretty high up the list of potential cost savings. Therefore, this can only be at the expense of benefit security. The limited scope of the “lifeboat” operated by the UK Government provides little reassurance if all goes pear shaped .
At least with a transfer to a QROPS if structured in the right way and with specialist advice one way or another you have taken control of your fund. There is no need to fret about the actions of others and how those actions might affect the security of your pension security .
Arbutus QROPS. Stephen Ward together with Robert Burns are specialists in overseas pension transfers and write regular articles for the press on QROPS, pension transfers, business and economic issues. See QROPS transfers for further information.
Shortcut to pragmatic tips in the sphere of internet marketing – read the web page. The time has come when proper information is really at your fingertips, use this possibility.
Tags: Qrops
Posted in Retirement · January 22nd, 2010 · Comments (0)
No comments yet