QROPS (ROPS) Pitfalls: How to protect yourself

Every day, thousands of expats are cold-called by "financial advisers" using LinkedIn to identify and target potential QROPS transfer candidates.

While QROPS transfers can provide significant benefits for people no longer living in the UK, they are certainly not suitable for everyone.

However, they are always lucrative for unregulated financial advisers who stand to receive commissions for completing QROPS pension transfers. And in some cases, they will do or say anything to close that deal, which potentially cost expats tens of thousands from their pension pots.

At Experts for Expats, we regularly receive requests to help expats who have been cold-called by offshore financial advisory firms selling the benefits of QROPS and overseas pension transfers. In such cases, the expat has rarely received all of the required information which would enable them to fully evaluate the options available.

One such expat living in North America contacted us in March seeking independent guidance regarding QROPS and their pensions.

This is their experience in their own words.

The initial QROPS cold-call(s)

In December 2015, I was cold-called by a couple of financial companies that basically trawl LinkedIn for Brits abroad, who they can see from their work history probably still have company or private pension plans back in the UK.

Both of these companies work out of Dubai and my initial thought was to dismiss them but they each presented a plausible case regarding new pension rules and possibilities that I should be made aware of, including the potential benefits of taking out a QROPS scheme.

I knew nothing about any of this but since one of them offered face to face meetings with a representative that periodically visits the area where I now live, I thought I may as well agree to a meeting and hear him out.

In addition, their representative appeared to be associated with a UK office, which I found was FCA-listed so I felt somewhat reassured by that since the other company was not listed at all. However, I later discovered that the office processing the paperwork was in fact based in Dubai so the FCA had no jurisdiction over either firm after all, even though it had been suggested that I was being offered a safer, less risky path through all of this due to the UK office being registered.

This led to me completing permission papers for my UK pension plan holders to release information regarding transfer values to this company in order for them to come up with a recommendation.

The output of this was the proposal to take out a QROPS using a Malta-based trustee and investment platform in the Isle of Man.

I presented this information to the second company that had contacted me around the same time and while they agreed with the trustee recommendation, they claimed to offer their own investment platform that could sidestep all of the fees associated with the one that had been chosen in the first company’s recommendation.

Of these, the so-called "establishment fee" was a big concern as it added up to tens of thousands of pounds over a 10-year period (it later became clear to me that this was basically the rep’s commission), as well as there being penalty fees for early closure within that time frame.

Too good to be true?

This seemingly made the second company’s offering a no-brainer alternative but my thoughts then were that if something seems too good to be true then it probably is, and there was probably something hidden in their fee structure that I did not yet know about.

At this point, I wanted to take a step back as neither of these options sat well with me so I wanted to try and identify an independent adviser that could pass comment on both of their offerings and perhaps either confirm that they were genuine and par for the industry, or not.

Further QROPS research and request for independent advice

I was also looking for clarity on the QROPS idea itself as I was still not sure about the pros and cons associated with the whole thing. During my research, I found the Experts for Expats website and sent off an enquiry that was quickly answered, and this led to my details being passed to a couple of recommended advisers.

Both turned out to be very helpful indeed. One was based in London and we had a good phone call that was left such that I could get back in touch for further information if needed, with no pressure and no hard-sell.

The other was located in Dubai and while I was initially sceptical to hear any more from an offshore company, I could not have been more wrong as his advice in particular proved absolutely invaluable.

What had not been clear to me until this point was that those pension funds that are in defined benefit / final salary schemes (as most of mine are), are basically low risk to me as the responsibility remains with my former employers to provide the pensions on retirement.

So while QROPS do remain an option for specific reasons, if pension security is the priority (which in my case it is), then these funds are best left well alone. There was even a short article saying this very thing written by the adviser I was speaking to on his company’s website.

This had never been mentioned to me before and was not at all clear in the reports I had seen from the company I had been dealing with for several months.

No wonder I suppose, given the commission that was up for grabs should I have gone the QROPS route. In fact, the pensionable value of my plans only really became clear to me when I looked at the transfer reports from my pension companies, which I had asked for in closing off my dealings with this company.

Long story short: The referral by Experts for Expats led me to a couple of advisers that provided exactly what I required.

The adviser with whom I had the most communication clarified what would be best for me as an individual with limited understanding of pension transfer implications and confirmed that I was correct in stepping away from what had been put in front of me by these cold-callers.

It should be kept in mind that QROPS are certainly an option but not a necessity for expat pensions. It really depends on what type of pension you would be moving out of and what your individual requirements are.

What to do if you have been cold-called

The case above is typical of what Experts for Expats try to assist with on a daily basis.

Our primary goal is to provide access to advisers who are genuinely independent and qualified to provide advice unique to each person, and who are ultimately not sales people.

If you have been the recipient of a QROPS cold-call and are concerned or unsure what to do next, the advisers in our network can help.

Complete the form on this page and we’ll arrange for a free and fully independent consultation which will evaluate your suitability for a QROPS transfer and offer recommendations for your best course of action.

At the very least, you will be able to get peace of mind on any decision you make.