A Brief Guide To QROPS Fraud
LEARNING OBJECTIVES
We’re passionate about providing free, high quality and up-to-date information to Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
What is a QROPS
The potential benefits of a QROPS
How to avoid QROPS Scams
Tips to protect your finances as an Expat
How to Avoid QROPS Scams
Retirement is the well-earned chapter in life where you finally get to enjoy the fruits of your labour. For many, managing their pensions becomes a vital aspect of planning for retirement - searching for the best options to feel safe and secure once the time comes. One option that often arises is the Qualifying Recognised Overseas Pension Scheme (QROPS) for those living abroad looking to transfer their savings.
Although it may offer flexibility and tax advantages, it may also be a breeding ground for fraud. In this blog, you will learn about QROPS fraud in-depth, as well as how you can protect yourself from it by understanding the risks involved and how to avoid them.
What is QROPS?
QROPS (Qualifying Recognised Overseas Pension Scheme) allows people who have built up pension savings while working in the UK to transfer their UK pensions abroad when they move overseas and expands the alternative for managing retirees’ finances.
QROPs can be helpful for those leaving the UK, or even UK residents thinking about moving abroad – offering potential tax savings, inheritance benefits and wider investment options.
The Benefits of QROPS
Before we explore the risks associated with QROPS, let's take a look at the legitimate benefits it can offer:
Tax Efficiency
QROPS can bring tax benefits, for instance, it can reduce your UK pension income tax depending on your country of residence. Maltese QROPS legislation allows you to take up to 25% of your pension fund free from UK tax on retirement.
Investment Flexibility
You can have greater control over your retirement investments, as well as the ability to select funds that sync with your own long-term financial intentions.
Currency Options
QROPS can be denominated in different currencies, thereby mitigating currency risk in case you want to retire overseas. This means that your pensions will remain stable in the currency of your choice and country of retirement.
Inheritance Planning
By facilitating the seamless transfer of pension funds to beneficiaries in a tax-efficient manner, these schemes offer an avenue for securing the financial future of loved ones.
Recognising QROPS Fraud
Let’s turn our attention to the darker side of QROPS - the fraud behind the pension schemes. In 2022 alone, 253 people reported QROPS fraud to Action Fraud. This level of reported incidents highlights the need for awareness and vigilance, especially as scammers become more tech savvy and persuasive.
Some common fraud signs to look out for:
Promises that are too good to be true
Often providers will start overpromising and making bold claims about outstanding returns or exceptional tax benefits - whilst this may be the truth in some cases, usually your provider would try to contact you via post to let you know about any outstanding balances or great benefits.
Lack of transparency
It's crucial to check credentials of your provider and ensure they have a great track record of previous pensions management. Transparency should be evident through every step of the service, including the mention of fees, charges and risks.
Pressure sales tactics
When communicating with your provider, you should never feel rushed or pressured to make a decision - always ensure that you take your time to process the information given to you.
Offshore accounts
Whilst offshore accounts can be legal, unfortunately, it is also often used as a tax fraud tactic. When making transfers, ensure they’re made to an authorised, legitimate QROPS provider.
Though some may be more obvious, there are also some scams that are more discrete, for instance, hidden fees and charges which leave individuals with less than what they may have expected. Therefore, it’s important to always speak to professionals to help you guide through any surprises and ensure you are protected.
Protecting Yourself
Having explored the risks of QROPS fraud, it’s equally as important to be aware of the ways in which you can protect yourself from scammers and ensure your pension savings are protected.
Prevent the risk of QROPS fraud by:
Researching your providers and ensuring that it is trustworthy and has a proven history of helping individuals protect their finances.
Seeking expat investment advice from professionals that specialise in pensions and retirement, specifically guiding you through the complexities of the QROPS world.
Keeping your information safe and secure to avoid identity theft.
Never rushing into decisions and always doing some research to make an informed choice.
Doing extensive research of various providers and checking to see if they are registered with the appropriate regulatory authorities.
There is no doubt that retirement planning overseas can be quite simplified with QROPS. There is, however, a real threat of QROPS fraud. To keep your savings safe and secure, you should always do your research, know the advantages, be aware of suspicious activity, and take proactive actions to protect your money for retirement. Research, due-diligence and awareness are your best weapons in the arsenal of the QROPS world.
If you are ever unsure, or simply need some guidance, reach out to one of our professionals for help.
