We make decisions daily for the things we buy, choosing from a list of QROPS providers for the transfer of a UK pension is no different.
Sometimes when we make a purchase, it can be challenging to work out which is the best option. Often, it’s merely a matter of personal taste as we buy tangible products that we can see, feel and hear. Other times, particularly when buying financial services, it becomes a question of who we are most comfortable with as we assess the offer of an insurance provider, investment manager or pension plan.
Services are intangible products, making it a bit more problematic to gauge whether they will actually ‘do what they say on the tin’. It is, therefore, vital to do some research before placing our trust in the provider who we feel most meets our needs.
Internet search engines have become the modern-day equivalent of consumer magazines that guide us on what experts think. However, just because something is high up the rankings on the internet, does not guarantee its integrity. Beware fake news!
In some cases, when looking for an intangible product such as car insurance, it seems to make sense to go with the lowest quote, especially when the broker presents web visitors with a cost-analysis of the whole market. This is not always the best option. If insuring a particularly expensive car, it would probably be better to go to a specialist.
The relationship between QROPS providers and financial advisers
QROPS are also an intangible product. In exchange for transferring a pension fund, QROPS providers present you with a legal document confirming your membership of the scheme and, usually, online access to the value of your investments.
QROPS differ from car insurance in that you can’t buy direct from a provider. All applications must be submitted by qualified Financial Advisers (FA’s); investments can only be placed by those with the relevant regulatory permissions.
FA’s require Mifid 2 accreditation to advise on investment funds. Without Mifid 2, an adviser is limited to offering a Discretionary Fund Management (DFM) service or specific insurance-based plans. DFM’s are generally ‘sound’ investments; however, investors have to forfeit any form of influence on where their money is allocated. Some people are happy with this (it may undoubtedly suit the FA!), but consumer choice and flexibility are compromised. By contrast, QROPS members with actively managed portfolios can consult their advisers and have input in how their investments are managed.
Choosing the right QROPS provider
QROPS providers are similar in many ways but very different in others. Some are overly cautious about what investments they will accept and from whom. Others are a little too cavalier and allow investment into funds which aren’t suitable or appropriate for their client. Malta QROPS providers are now strictly regulated, which has shut the door to ‘new horses being able to bolt’. Other jurisdictions aren’t as well regulated, which leaves that same door wide open and encourages poor practice.
Value for money is always a factor when deciding which provider to choose. In reality, there isn’t a great deal of difference on charges between QROPS providers. However, now and then, one company will attempt to undercut the competition with significant discounts. Quality of service is just as important as costs. As the old saying goes: you get what you pay for!
In conclusion, when deciding which adviser and QROPS provider to select for your pension transfer, consideration should be given to the following:
- Value for money, rather than simply cost.
- Service: Ask your adviser about their experience with various QROPS providers and why one might be better than another from a service perspective.
- Investment options: Are they restricted or unlimited?
- Which is the most appropriate location?
- Tax implications both now and in the future.
- Does the provider offer flexible income payments and lump-sum payments?
Finally, you should draw up your own list of requirements. The above points cover the main issues, but you may have particular QROPS provider demands.