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Beware of Financial Advisers Promising to Convert 100% of your Pension into Cash via a QROPS

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UK pensions transferred into a QROPS are subject to a maximum tax free commutation of up to 25% (some jurisdictions allow up to 30%) of the pension fund with the remaining 75% used to provide the member with a retirement income for life. Unfortunately, some advisers are waiting for the five year HMRC reporting requirement to lapse to “trust bust pensions.”They are promising clients that after five years they can convert 100% of their pension funds into cash thereby failing to comply with the spirit of QROPS legislation as laid down by HMRC.

Some New Zealand schemes operate “unlocked superannuation schemes” which remain silent on the issue of level of withdrawals that members can take. Unscrupulous advisers are using these schemes to convert 100% of pensions into cash. There is increased speculation that HMRC is keeping a close eye on New Zealand as a QROPS approved financial centre. If QROPS approval is removed then like Singapore pension assets will be frozen and HMRC will have the power to retrospectively impose an unauthorised payment tax charge of 55% of the pension assets.

If you have already transferred your UK pension benefits into a QROPS on the basis that you can convert your pension into cash we would STRONGLY RECOMMEND that you speak to us and seriously consider transferring your pension assets into a scheme that is unlikely to be frozen.

Quite simply beware of false promises, if it looks too good to be true, it probably is and HMRC are able to investigate and make retrospective tax charges.