Uk Pension Transfer To Offshore Qrops

[AnotherOneAmerican]

QROPS, high charges and high risks.

Why not consider a SIPP with pension draw down.

This lot have very low yearly charges, and you can manage your portfolio yourself over the internet or have them do it for you.

These guys have recommendations from financial magazines every year.

http://www.hl.co.uk/

Have a look at their SIPP pages.

Remember, IFAs working outside the UK are bound by very few rules and often end up putting your pension in junk bonds that give them the biggest commissions. No comeback on them if it all goes wrong. If you must use an IFA, use one based in the UK, at least they have to obey some rules. DO NOT USE ONE BASED IN THAILAND UNDER ANY CIRCUMSTANCES.

The main problems with a SIPP as far as I can see are that I would have to pay income tax and also once I die the gov would take a half of the remainder as inheritance tax. The IFA's that I have talked to (both UK and non UK) do not handle any of the money, it is transferred to the holding company in Gibraltar, New Zealand or wherever, both of which have very strict laws regarding the financial sectors. These are international companies not some fly by night operation and you are given complete freedom as to how the money is invested.

There obviously is always risk in investing money but I don't think the performance of the UK or the US over the last few years can give anyone much confidence.

I have been googling all afternoon and have yet to find any criticism of any QROPS company so if anyone has found any bad reports please let me know. You are right though about Thai based companies, not that they are necessarily all bad but the laws governing the financial industry here are just too lax.

The holding company has no control over where the IFA invests.

The inheritance tax is only after you and your spouse die.

But if you live longer than 5 years, there won't be much left in the QROPS anyway.

3-5% is about the best return you can expect anywhere.

Many offshore IFAs have been losing 3-5% in the last 5 years.

These guys are con men, they will tell you whatever you want to hear except for the truth.

[wordchild]

It's been awhile now since the topic was started, I am looking at Abbey as one option for QROPS, did you use them in the end?

QROP,s can be a good idea for a long term expat, I have one myself and am pleased I did it. As others have said be cautious in who you go to for advice there are some real sharks swimming in this pool. The problem is with these products is they can be set up with a charging structure which is high and lucrative for the advisor but costly to the long term health of your fund. As far as I can see this is common practice with advisors in the offshore market. Be particularly careful as the charges are not always obvious or made explicit by the advisor . Much better to use a UK based IFA esp now they are better regulated..

I would not touch Abbey with a very long barge pole they are (I believe) part of the dreaded de vere group who have a very poor reputation.

Edited July 25, 2013 by wordchild

[AyG]

Why not consider a SIPP with pension draw down.

These guys have recommendations from financial magazines every year.

http://www.hl.co.uk/

Hargreaves-Lansdown don't accept overseas clients. (I know - I've asked.)

[AyG]

The holding company has no control over where the IFA invests.

The inheritance tax is only after you and your spouse die.

But if you live longer than 5 years, there won't be much left in the QROPS anyway.

3-5% is about the best return you can expect anywhere.

Many offshore IFAs have been losing 3-5% in the last 5 years.

These guys are con men, they will tell you whatever you want to hear except for the truth.

A fair bit of misinformation here.

(1) The holding company (which I presume means the pension trustee) typically doesn't get involved in investment decisions. It depends upon the nature of the contract between the pension holder and the trustee. It's up to the pension holder to decide who manages the investments. It can be an IFA, or it can be the pension holder if he/she feels capable of taking on the role. It can also be some other third party nominated by the pension holder. However, in some cases the trustee will manage the investments.

(2) With a QROPS there is no inheritance tax payable in most jurisdictions. (From memory, Isle of Man is an exception to this.)

(3) As for "if you live longer than 5 years there won't be much left" - this is clearly nonsense. One is restricted in the amount one can take from the fund by HMRC rules. The rules are a bit complex, but typically you're limited to taking 4-5% or thereabouts per year at retirement age. (That's excluding the optional, one-off 25-30% lump sum.)

(4) As for "3-5% is about the best return you can expect anywhere" - it's not. Return all depends upon the amount of risk you're willing to accept. If you want a risk free investment such as UK Gilts or US Treasuries, you'd be pretty lucky to get 3%. With a diversified portfolio 8% per annum over 20 years or so isn't an unreasonable target.

[AnotherOneAmerican]

The holding company has no control over where the IFA invests.

The inheritance tax is only after you and your spouse die.

But if you live longer than 5 years, there won't be much left in the QROPS anyway.

3-5% is about the best return you can expect anywhere.

Many offshore IFAs have been losing 3-5% in the last 5 years.

These guys are con men, they will tell you whatever you want to hear except for the truth.

A fair bit of misinformation here.

(1) The holding company (which I presume means the pension trustee) typically doesn't get involved in investment decisions. It depends upon the nature of the contract between the pension holder and the trustee. It's up to the pension holder to decide who manages the investments. It can be an IFA, or it can be the pension holder if he/she feels capable of taking on the role. It can also be some other third party nominated by the pension holder. However, in some cases the trustee will manage the investments.

(2) With a QROPS there is no inheritance tax payable in most jurisdictions. (From memory, Isle of Man is an exception to this.)

(3) As for "if you live longer than 5 years there won't be much left" - this is clearly nonsense. One is restricted in the amount one can take from the fund by HMRC rules. The rules are a bit complex, but typically you're limited to taking 4-5% or thereabouts per year at retirement age. (That's excluding the optional, one-off 25-30% lump sum.)

(4) As for "3-5% is about the best return you can expect anywhere" - it's not. Return all depends upon the amount of risk you're willing to accept. If you want a risk free investment such as UK Gilts or US Treasuries, you'd be pretty lucky to get 3%. With a diversified portfolio 8% per annum over 20 years or so isn't an unreasonable target.

You are either a fool or a IFA.

[fiberman]

The holding company has no control over where the IFA invests.

The inheritance tax is only after you and your spouse die.

But if you live longer than 5 years, there won't be much left in the QROPS anyway.

3-5% is about the best return you can expect anywhere.

Many offshore IFAs have been losing 3-5% in the last 5 years.

These guys are con men, they will tell you whatever you want to hear except for the truth.

A fair bit of misinformation here.

(1) The holding company (which I presume means the pension trustee) typically doesn't get involved in investment decisions. It depends upon the nature of the contract between the pension holder and the trustee. It's up to the pension holder to decide who manages the investments. It can be an IFA, or it can be the pension holder if he/she feels capable of taking on the role. It can also be some other third party nominated by the pension holder. However, in some cases the trustee will manage the investments.

(2) With a QROPS there is no inheritance tax payable in most jurisdictions. (From memory, Isle of Man is an exception to this.)

(3) As for "if you live longer than 5 years there won't be much left" - this is clearly nonsense. One is restricted in the amount one can take from the fund by HMRC rules. The rules are a bit complex, but typically you're limited to taking 4-5% or thereabouts per year at retirement age. (That's excluding the optional, one-off 25-30% lump sum.)

(4) As for "3-5% is about the best return you can expect anywhere" - it's not. Return all depends upon the amount of risk you're willing to accept. If you want a risk free investment such as UK Gilts or US Treasuries, you'd be pretty lucky to get 3%. With a diversified portfolio 8% per annum over 20 years or so isn't an unreasonable target.

I generated a spreadsheet to see how the returns looked over my lifetime (I don't intend dying until at least 90 ) and to keep the invested sum without eating into it I would need a return of about 6.8%. At 5% the money would run out at 92 years old. One of my main aims, apart from not paying tax is to leave a decent sum for my wife and children and QROPS appears to be the only way to do it. A SIPP may give similar returns but I would be paying 20% UK tax on it and the remaining sum would be hit with inheritance tax when I did die, which I believe is around 50%.

If I could get a return of 8% then this would inflation proof the pension but I prefer to look at the worst case scenarios.

At present I am leaning towards a QROPS in New Zealand who seem to have very strict financial protection. That would be using a UK IFA but I still have to determine exactly what the costs will be.

[AnotherOneAmerican]

The holding company has no control over where the IFA invests.

The inheritance tax is only after you and your spouse die.

But if you live longer than 5 years, there won't be much left in the QROPS anyway.

3-5% is about the best return you can expect anywhere.

Many offshore IFAs have been losing 3-5% in the last 5 years.

These guys are con men, they will tell you whatever you want to hear except for the truth.

A fair bit of misinformation here.

(1) The holding company (which I presume means the pension trustee) typically doesn't get involved in investment decisions. It depends upon the nature of the contract between the pension holder and the trustee. It's up to the pension holder to decide who manages the investments. It can be an IFA, or it can be the pension holder if he/she feels capable of taking on the role. It can also be some other third party nominated by the pension holder. However, in some cases the trustee will manage the investments.

(2) With a QROPS there is no inheritance tax payable in most jurisdictions. (From memory, Isle of Man is an exception to this.)

(3) As for "if you live longer than 5 years there won't be much left" - this is clearly nonsense. One is restricted in the amount one can take from the fund by HMRC rules. The rules are a bit complex, but typically you're limited to taking 4-5% or thereabouts per year at retirement age. (That's excluding the optional, one-off 25-30% lump sum.)

(4) As for "3-5% is about the best return you can expect anywhere" - it's not. Return all depends upon the amount of risk you're willing to accept. If you want a risk free investment such as UK Gilts or US Treasuries, you'd be pretty lucky to get 3%. With a diversified portfolio 8% per annum over 20 years or so isn't an unreasonable target.

I generated a spreadsheet to see how the returns looked over my lifetime (I don't intend dying until at least 90:) ) and to keep the invested sum without eating into it I would need a return of about 6.8%. At 5% the money would run out at 92 years old. One of my main aims, apart from not paying tax is to leave a decent sum for my wife and children and QROPS appears to be the only way to do it. A SIPP may give similar returns but I would be paying 20% UK tax on it and the remaining sum would be hit with inheritance tax when I did die, which I believe is around 50%.

If I could get a return of 8% then this would inflation proof the pension but I prefer to look at the worst case scenarios.

At present I am leaning towards a QROPS in New Zealand who seem to have very strict financial protection. That would be using a UK IFA but I still have to determine exactly what the costs will be.

Don't do it, you clearly don't understand the risk or the rules.

You can't get 8% at the moment without extreme risk.

AUS has just had the biggest pension scandal ever, LM Managed/LM International fund in Queensland just lost 75% of all their assets.

NZ has the same rules, you don't have any protection on a UK earned pension once it's outside of the UK.

QROPS fees will take AT LEAST all the profit on a 100kUKP pension.

Edited July 26, 2013 by AnotherOneAmerican

[changnaam]

"QROPS fees will take AT LEAST all the profit on a 100kUKP pension."

Absolute rubbish, the "profit" depends on the performance of the QROPS, not the cost.

If you had an old Guernsey QROPS with high annual trustee costs / bond charges (on a GBP100K pension) you could easily need to make 5% plus each year to cover the cost but things have changed with the development and maturing of the QROPS market and now you can certainly make a profit (in the right QROPS scheme and jurisdiction) where growth is beyond 2% per annum. (trustee cost GBP 800 / Bond around 1%)

Is that a huge cost to give your family security?

Would love to hear where the QROPS cost will take AT LEAST all the profit ?

[wordchild]

"QROPS fees will take AT LEAST all the profit on a 100kUKP pension."

Absolute rubbish, the "profit" depends on the performance of the QROPS, not the cost.

If you had an old Guernsey QROPS with high annual trustee costs / bond charges (on a GBP100K pension) you could easily need to make 5% plus each year to cover the cost but things have changed with the development and maturing of the QROPS market and now you can certainly make a profit (in the right QROPS scheme and jurisdiction) where growth is beyond 2% per annum. (trustee cost GBP 800 / Bond around 1%)

Is that a huge cost to give your family security?

Would love to hear where the QROPS cost will take AT LEAST all the profit ?

It is certainly the case that QROP admin fees have come down and that is welcome. However I have looked at a couple of recent QROP proposals put up to colleagues by offshore advisors and the devil is certainly in the detail and the charges not always obvious. One thing you have to watch are the charges associated with the investment products you want to ( or are advised to) invest in; eg the upfront load on a fund (say 5% plus) normally a UK based IFA, working on a fee, or any discount broker, will rebate the majority of this to you in the form of extra units not so (from what I have seen) the offshore guys; also the annual management charge on the fund, again, you should expect a chunk of this to be rebated to you but, also unlikely with an offshore advisor. Also never ever invest via anything called an offshore bond or portfolio bond, there is just no real need for these things within a QROP structure they are simply designed to benefit the IFA not you and can also add another layer of charges.

Having said all this, I think for the right person QROPs can be a great idea, you just need to be a bit savvy watch those charges and find a good UK based IFA who will help you get an efficient/suitable fund structure in the right jurisdiction and all this ,obviously, in exchange for being paid a fair and reasonable fee.

Edited July 26, 2013 by wordchild

[wordchild]

The other issue is that IFA,s (esp offshore) tend to know very little, beyond the basics, about investment. They are really just product salesmen. And, like all salesmen they want to push the products they make the most money from. Investment Trusts, low cost equity index funds, low cost income funds, are good products suitable for many people that are rarely mentioned by offshore IFA,s. The reason being they don't make much out of them. They want you to buy something more esoteric such as market linked bonds, capital protected bonds, or student housing out of which they can earn higher fees. I think QROP,s work best for people with a reasonable level of investment knowledge who are able to keep the investment decisions out of the hands of the IFA and essentially manage it themselves. It does not take much effort to make yourself reasonably investment savvy and, it can also be fun.

Edited July 27, 2013 by wordchild

[brewsterbudgen]

'Does anyone have recent dealings with Financial Advisers they would recommend?'

I have used MBMG based in Bangkok over the years and would be happy recommending them ..

I've used Horizon Wealth Management in Bangkok and found them to be good.

They advised be not to transfer my UK Final Salary pension to QROPS, as it was better off staying where it was.

[AnotherOneAmerican]

'Does anyone have recent dealings with Financial Advisers they would recommend?'

I have used MBMG based in Bangkok over the years and would be happy recommending them ..

I've used Horizon Wealth Management in Bangkok and found them to be good.

They advised be not to transfer my UK Final Salary pension to QROPS, as it was better off staying where it was.

You should NEVER transfer out of a UK final salary scheme for any reason.

They produce a 10% index linked return or better on the transfer out value.

(Double the income of a private pension)

[Loiner]

Quote:

AUS has just had the biggest pension scandal ever, LM Managed/LM International fund in Queensland just lost 75% of all their assets.
NZ has the same rules, you don't have any protection on a UK earned pension once it's outside of the UK.


Remember, IFAs working outside the UK are bound by very few rules and often end up putting your pension in junk bonds that give them the biggest commissions. No comeback on them if it all goes wrong. If you must use an IFA, use one based in the UK, at least they have to obey some rules. DO NOT USE ONE BASED IN THAILAND UNDER ANY CIRCUMSTANCES.

I'll second the above as a victim of LM Investment Management, and now this month Brandeaux Funds, on the advice of a Thailand based IFA. Don't believe a word from the mealy mouthed parasitic IFAs. These shysters and charlatans are only grabbing commissions on the back of your hard earned pension. You could easily loose the lot, as some of the TV members have done already.

[changnaam]

'Does anyone have recent dealings with Financial Advisers they would recommend?'

I have used MBMG based in Bangkok over the years and would be happy recommending them ..

I've used Horizon Wealth Management in Bangkok and found them to be good.

They advised be not to transfer my UK Final Salary pension to QROPS, as it was better off staying where it was.

You should NEVER transfer out of a UK final salary scheme for any reason.

They produce a 10% index linked return or better on the transfer out value.

(Double the income of a private pension)

I don't think you can be so simplistic about it.

Would you be happy to see your partner get half of your income (at best) when you are no more?

What about your kids who could potentially benefit from your pension upon death?

Will the scheme still be able to pay out as deficits grow and payments into the scheme are dropping for the rest of yours and your partners life?

Everyone is entitled to an opinion but you are stating things as FACT when it is your opinion, not fact. People on here may take your advice as gospel and potentially miss out on a whole host of benefits.

I have not seen many schemes offering a 10% index linked return, and I thought the transfer value was affected by the GAD (Govt Actuarial Dept) rates, and inflation which was related to the income which your pension would pay, rather than a finite pension "pot". The transfer value of a defined benefit pension is not related to any amount of money which is in the "pension pot" (it relates to the length of service with a company, and the salary which you enjoyed over that period) unlike a personal or defined contribution scheme, it relates to the benefit or income which that pension will pay out upon retirement. This transfer value moves in line with GAD and Inflation, not the value of an investment.

[GavinK]

Anyone looked at using a QNUPS ?

[chiang mai]

Anyone looked at using a QNUPS ?

It would be a good test of any offshore IFA to find out if they even know what a QNUP is!

[Dave Phuket Sisaket]

I see alot of misguided opinions on this thread, but I am not going to address them all.

I am an IFA and based in Thailand. I have an undergraduate degree as well as a top ten European MBA in finance. I have worked onshore in a highly regulated market and offshore as well.

First, I agree that 95% of IFAs in this country are cowboys who have never studied finance in their lives. However, the onshore and frankly global financial services industry is so rotten to the core that onshore advice generally is just as bad. My brother is a prosecutor for the SEC in the states and the crap that goes on there is just as bad.

QROPS can save you a ton of money in taxes, far outweighing any costs associated. However it needs to be a fairly large pension for this to be true.

There are a range of charging structures out there and if chosen correctly a QROPS can actually cost less than a SIPP over the life of the pension in some instances.

The thing most people don't understand about these pensions is that there are two unrelated issues in play. First is the decision to transfer, which is a tax and estate planning decision. Next is the ongoing investment management, which is where relying on your average Devere type Thailand based IFA could get you into trouble.

People who have had a rotten experience with the returns on their investments often regret transferring to a QROPS, yet many people in SIPPs have also lost money in this low interest rate environment.

I have never used LM but they are a perfect example of the kind of fund people are using simply because they can no longer get a safe 5-6% return with a mix of fixed deposits, money markets, and bond funds. In the quest for a safe fixed income, funds like LM will come in with a nice story to tell and IFAs and their end clients alike buy into the concept.

My advice is usually to transfer into a QROPS and keep most of the money in fixed deposits until rates overshoot their historical averages, which is the inevitable end result of all the money being printed at the moment.

[AyG]

My advice is usually to transfer into a QROPS and keep most of the money in fixed deposits until rates overshoot their historical averages

This seems to me odd advice for a few of reasons.

(1) Putting money into fixed (I presume non-THB) deposits leaves one very exposed to exchange rate risk.

(2) Inflation will eat away at the value of the pension fund if investing in fixed deposits. Investment in equities, for example, allows for growth ahead of inflation over the medium term.

(3) There is no apparent diversification of risk.

Would you care to explain your thinking, please?

[topt]

I see alot of misguided opinions on this thread, but I am not going to address them all.

I am an IFA and based in Thailand. I have an undergraduate degree as well as a top ten European MBA in finance. I have worked onshore in a highly regulated market and offshore as well.

First, I agree that 95% of IFAs in this country are cowboys who have never studied finance in their lives. However, the onshore and frankly global financial services industry is so rotten to the core that onshore advice generally is just as bad. My brother is a prosecutor for the SEC in the states and the crap that goes on there is just as bad.

QROPS can save you a ton of money in taxes, far outweighing any costs associated. However it needs to be a fairly large pension for this to be true.

There are a range of charging structures out there and if chosen correctly a QROPS can actually cost less than a SIPP over the life of the pension in some instances.

The thing most people don't understand about these pensions is that there are two unrelated issues in play. First is the decision to transfer, which is a tax and estate planning decision. Next is the ongoing investment management, which is where relying on your average Devere type Thailand based IFA could get you into trouble.

People who have had a rotten experience with the returns on their investments often regret transferring to a QROPS, yet many people in SIPPs have also lost money in this low interest rate environment.

I have never used LM but they are a perfect example of the kind of fund people are using simply because they can no longer get a safe 5-6% return with a mix of fixed deposits, money markets, and bond funds. In the quest for a safe fixed income, funds like LM will come in with a nice story to tell and IFAs and their end clients alike buy into the concept.

My advice is usually to transfer into a QROPS and keep most of the money in fixed deposits until rates overshoot their historical averages, which is the inevitable end result of all the money being printed at the moment.

Hi DPS - can you put a figure on your "it needs to be a fairly large pension for this to be true"

Thanks.

[AnotherOneAmerican]

I have never used LM but they are a perfect example of the kind of fund people are using simply because they can no longer get a safe 5-6% return with a mix of fixed deposits, money markets, and bond funds. In the quest for a safe fixed income, funds like LM will come in with a nice story to tell and IFAs and their end clients alike buy into the concept.

LM paid 10% commission to the IFA on receipt of new investment funds, with ongoing payments of 3% for every year the money stays in. Plus a free trip to Australia for the IFA. Contracts will vary depending on client base of IFA.

It's projected gain was never more than 5% for the investor. The main profits were for the IFA.

Most people don't understand the IFA has contracts with various funds to pay the IFA regular money.

Funny, you didn't mention that either.

Two main ways for a dodgy IFA to make money,

1 commission + contract

2 investment churning

Investment churning, you put your clients money in to something you know won't do well (earning 5% commission), then when you need a bit of quick cash you tell your client the investment is performing badly, and you need to change it (earning another 5% commission).

How to spot an iffy IFA,

When they want to put more than 10% of your money in any one fund or family of funds.

When they keep churning your investments.

Best advice,

don't use small firms for advice, they are always short of cash so tempted to shaft you.

use a big company that refunds their initial commissions

insist your pension is spread over more than 10 entirely separate investments (max 5-10kUKP per investment), 20 is better.

For example not 33% scottish widows managed, 33% scottish widows asian holdings, 33% scottish widows euro fund as that exposes you not only to scottish widows company failing, but risking a 33% loss on a fund with a dishonest manager.

Oh, oh,

I don't have a degree in financial management, but I did pay a dodgy IFA 1.5Mbht from my pension fund to learn his tricks.

Edited July 30, 2013 by AnotherOneAmerican

[changnaam]

I have never used LM but they are a perfect example of the kind of fund people are using simply because they can no longer get a safe 5-6% return with a mix of fixed deposits, money markets, and bond funds. In the quest for a safe fixed income, funds like LM will come in with a nice story to tell and IFAs and their end clients alike buy into the concept.

LM paid 10% commission to the IFA on receipt of new investment funds, with ongoing payments of 3% for every year the money stays in. Plus a free trip to Australia for the IFA. Contracts will vary depending on client base of IFA.

It's projected gain was never more than 5% for the investor. The main profits were for the IFA.

Most people don't understand the IFA has contracts with various funds to pay the IFA regular money.

Funny, you didn't mention that either.

Two main ways for a dodgy IFA to make money,

1 commission + contract

2 investment churning

Investment churning, you put your clients money in to something you know won't do well (earning 5% commission), then when you need a bit of quick cash you tell your client the investment is performing badly, and you need to change it (earning another 5% commission).

How to spot an iffy IFA,

When they want to put more than 10% of your money in any one fund or family of funds.

When they keep churning your investments.

Best advice,

don't use small firms for advice, they are always short of cash so tempted to shaft you.

use a big company that refunds their initial commissions

insist your pension is spread over more than 10 entirely separate investments (max 5-10kUKP per investment), 20 is better.

For example not 33% scottish widows managed, 33% scottish widows asian holdings, 33% scottish widows euro fund as that exposes you not only to scottish widows company failing, but risking a 33% loss on a fund with a dishonest manager.

Oh, oh,

I don't have a degree in financial management, but I did pay a dodgy IFA 1.5Mbht from my pension fund to learn his tricks.

Finally Another One, a comment which I would agree with. I now understand why you were / are anti QROPS. I still think that you are better using an advisor to assist with a pension (would you service your own car / pull your own teeth) but the absolute key is doing your due diligence on the person that you are working with. The internet is a great tool and it is not so difficult these days to find out about an individual, or ask for references and to speak to current clients of theirs.

As the guy above says, 95% cowboys but there are some straight advisors out there and it is about doing your homework before taking the plunge. The lessons you have learnt are so true in terms of churning and contracts, or trails.

Sorry you had a bad experience but I am sure you are much better positioned not to make the same mistake, and I hope you were able to recover OK.

Edited July 30, 2013 by changnaam

[AnotherOneAmerican]

I have never used LM but they are a perfect example of the kind of fund people are using simply because they can no longer get a safe 5-6% return with a mix of fixed deposits, money markets, and bond funds. In the quest for a safe fixed income, funds like LM will come in with a nice story to tell and IFAs and their end clients alike buy into the concept.

LM paid 10% commission to the IFA on receipt of new investment funds, with ongoing payments of 3% for every year the money stays in. Plus a free trip to Australia for the IFA. Contracts will vary depending on client base of IFA.

It's projected gain was never more than 5% for the investor. The main profits were for the IFA.

Most people don't understand the IFA has contracts with various funds to pay the IFA regular money.

Funny, you didn't mention that either.

Two main ways for a dodgy IFA to make money,

1 commission + contract

2 investment churning

Investment churning, you put your clients money in to something you know won't do well (earning 5% commission), then when you need a bit of quick cash you tell your client the investment is performing badly, and you need to change it (earning another 5% commission).

How to spot an iffy IFA,

When they want to put more than 10% of your money in any one fund or family of funds.

When they keep churning your investments.

Best advice,

don't use small firms for advice, they are always short of cash so tempted to shaft you.

use a big company that refunds their initial commissions

insist your pension is spread over more than 10 entirely separate investments (max 5-10kUKP per investment), 20 is better.

For example not 33% scottish widows managed, 33% scottish widows asian holdings, 33% scottish widows euro fund as that exposes you not only to scottish widows company failing, but risking a 33% loss on a fund with a dishonest manager.

Oh, oh,

I don't have a degree in financial management, but I did pay a dodgy IFA 1.5Mbht from my pension fund to learn his tricks.

Finally Another One, a comment which I would agree with. I now understand why you were / are anti QROPS. I still think that you are better using an advisor to assist with a pension (would you service your own car / pull your own teeth) but the absolute key is doing your due diligence on the person that you are working with. The internet is a great tool and it is not so difficult these days to find out about an individual, or ask for references and to speak to current clients of theirs.

As the guy above says, 95% cowboys but there are some straight advisors out there and it is about doing your homework before taking the plunge. The lessons you have learnt are so true in terms of churning and contracts, or trails.

Sorry you had a bad experience but I am sure you are much better positioned not to make the same mistake, and I hope you were able to recover OK.

The guy that 'did' me had top reconsiderations.

You just can't afford to use the small firms because they are desperate to make money each month.

As for QROPS you need minimum pension of 100K UKP, and if you aren't paying 40% tax, not worthwhile.

[topt]

As for QROPS you need minimum pension of 100K UKP, and if you aren't paying 40% tax, not worthwhile.

I presume you mean a pension pot of 100k?

For clarification can you please explain why it is not worthwhile unless you are paying 40% tax - which means your income from taxable sources (pension and rents) after your allowance would be over 32k UKP and you would only be paying 40% on that extra. You would still be paying 20% up to that level. I have no axe to grind either way but it is something I will consider in the future

[AyG]

Assume you have a pension pot of £100,000 and take from it a pension of £4,000 a year.

If you hold this onshore and are a basic rate tax payer (i.e. other UK taxable income of more than £9,440), you will pay 20% tax and receive a pension of £3,200/year. (If you're a higher rate tax payer with other income in excess of £32,011 you'll receive £2,400.)

If you hold this pension offshore in a QROPS you won't pay any UK income tax, but you will have to pay around £1,000/year to the plan administrator, leaving you with a pension of £3,000/year.

This ignores the initial cost for an IFA to arrange the QROP for you.

But in summary, if you're a basic rate tax payer, you need a pot somewhat larger than £100,000 for a QROPS to be income tax-efficient (but the death tax situation may still make a QROP attractive).

[topt]

Assume you have a pension pot of £100,000 and take from it a pension of £4,000 a year.

If you hold this onshore and are a basic rate tax payer (i.e. other UK taxable income of more than £9,440), you will pay 20% tax and receive a pension of £3,200/year. (If you're a higher rate tax payer with other income in excess of £32,011 you'll receive £2,400.)

If you hold this pension offshore in a QROPS you won't pay any UK income tax, but you will have to pay around £1,000/year to the plan administrator, leaving you with a pension of £3,000/year.

This ignores the initial cost for an IFA to arrange the QROP for you.

But in summary, if you're a basic rate tax payer, you need a pot somewhat larger than £100,000 for a QROPS to be income tax-efficient (but the death tax situation may still make a QROP attractive).

Thanks AyG for that very specific illustration. Answers my question perfectly.

[Dave Phuket Sisaket]

In my opinion it is usually between 100-200k where it begins to make sense to transfer but it does depend on other issues such as additional income in the UK.

Where QROPS really begins to offer huge savings is when the transfer value approaches 500k to 1m plus. In these scenarios the tax savings can run into the hundreds of thousands.

With regards to LM, it is sickening that they were paying out such high soft commissions. I generally opt not to take a soft commission from funds unless the client is alright with a back end load and then we rebate it back to the client.

Not all small firms run the business model mentioned by the American, and in fact the bigger firms are generally even more sales orientated. One major bank that begins with H and ends with C had their wealth management business basically chucked out of Singapore because of the large number of complaints.

I chose to work for a small firm because I have more flexibility to use my own judgement and because I believe the partners do in fact want to do a good job for the clients. Generally the bigger the firm the closer they are to rotten core, and the corporate culture is money worship at the expense of all else.

The truth is that big or small, it is never wise to blindly trust an IFA. You should educate yourself enough to understand the risks of each investment you make. Every investment has risk and may cause you to lose money. There is no IFA on the planet who can guarantee you a positive return, and you should run very fast if one tries to.

[AnotherOneAmerican]

The truth is that big or small, it is never wise to blindly trust an IFA. You should educate yourself enough to understand the risks of each investment you make. Every investment has risk and may cause you to lose money. There is no IFA on the planet who can guarantee you a positive return, and you should run very fast if one tries to.

If you educate yourself enough to not blindly trust an IFA, then you don't need the IFA and can manage your own fund online.

[AyG]

The truth is that big or small, it is never wise to blindly trust an IFA. You should educate yourself enough to understand the risks of each investment you make. Every investment has risk and may cause you to lose money. There is no IFA on the planet who can guarantee you a positive return, and you should run very fast if one tries to.

If you educate yourself enough to not blindly trust an IFA, then you don't need the IFA and can manage your own fund online.

Except that certain products, such as QROPS, can only be opened through an IFA, and certain products can only be bought following an IFA's declaration of one's "suitability".

And it would take someone of exceptional arrogance to assume that they know it all and that a good IFA can't add some value in critiquing the investment decisions that one makes and providing an impartial, informed view of one's portfolio.

[AnotherOneAmerican]

And it would take someone of exceptional arrogance to assume that they know it all and that a good IFA can't add some value in critiquing the investment decisions that one makes and providing an impartial, informed view of one's portfolio.

How would you know a good IFA? all the ones I ever encountered in Thailand appeared to be crooks.

Actually I though of a test.

Ask your prospective IFA how he would invest your $100k, if he suggests you should put more than 20% of your money in any one fund, assume he is a crook (or incompetent), and therefore not worth using.

Edited August 1, 2013 by AnotherOneAmerican

[AnotherOneAmerican]

Doh, forum double pasts are a right pain.

Edited August 1, 2013 by AnotherOneAmerican