Many have transferred U.K. pensions offshore. For expats who have QROPs, if it has been left outside the U.K. for a set period of time you can get out of HMRC and U.K. based pension schemes and lower tax and increase flexibility.
These at the base seems attractive as they have been sold on the tax efficiency. However, many haven’t been told the truth behind the implications of transferring your U.K. pension and the hidden commission behind the transfer.
Having people reach out to me on a weekly basis saying that they have transferred to QROPs (or SIPPs) offshore and were told lies that the interest paid for the fees or that the advisor works for free and expats were not told about the cost and can say that many have been sold due to this malpractice.
They are not told about the flexibility of the pension or the structure it takes as many are stuck in offshore bonds that are done normally on a 10-year term where if you take your PCLS the charges are taken on the original premium value. These can be loaded with hidden charges.
For example, if you transferred your pension at age 50 on a 10-year term in an offshore bond with the hidden commission and you then at 55 take your 25% PCLS (you might be subject to 30% depending on where it is based) of your original pension say for example it was worth 100,000 GBP (and didn’t grow) so you had 75,000 GBP left you would still be paying the fees based for the next 5 years on 100,000 GBP.
I have seen many not get told about this when they transferred and end up paying up to 6% a year with all charges.
Before I go on about the charges, I want to clarify what is a QROPs.
What is a QROPS?
QROPS are actually very similar to SIPPs, as they are defined contribution schemes, but they are based outside the UK.
They can be based in any country around the world and qualify as a QROPS as long as the scheme meets specific requirements set by HMRC.
As mentioned, HMRC does not vet individual schemes – the scheme trustees notify HMRC of their existence and self-certify that the scheme meets the criteria.
After this, the scheme will normally become “recognised” by HMRC and will often (but not necessarily) be included on a list published on the government website.
QROPS are intended for people who are planning to or have already left the UK.
The main difference between SIPPs and a QROPS is the additional tax benefit a QROPS may bring to those living outside the UK.
So, what are the charges that you have to pay? This was one of the marital facts that seem to be omitted in the past by many rogue advisors.
You have a few layers of cost if you have transferred your pension to International SIPPs or QROPS
- Trust costs, if you are moving offshore this normally cost 180-600 GBP
- Platform costs, this depends on the charges that the advisor has charged upfront, still today in 2022 you can charge 5% up front without knowing in offshore bonds. This is then charged over a 10-year period so your policy has a higher charge of 1%-1.7% a year. Again this will be based on the original premium over this period.
- Admin cost, this is only in an offshore bond but normally have 400-500 GBP admin cost though out the life of the plan.
- Advisor cost, this is normally 0.5%-1.5%
- Fund cost, these can vary from 0.1% for ETFs such as Vanguard to 2% for high-cost active managed funds. Be aware as advisors have used these to get more commission by going in high-cost funds with 5% entry costs. You can check this out by looking at the ISIN on sites like Morningstar that can see if it has any entry costs. Also, a tip is to ask if you can go into ETFs and or just a major low-cost funds such as Bailie Gifford
“Should I transfer my UK pension?”
This may be a bit late if you have already transferred but want to explain the pros and cons of transferring pensions out.
As well as understanding what SIPPs and QROPS are, it is vital that you understand the benefits of the type of scheme you currently have.
There are two types of UK pension schemes – defined contribution and defined benefit.
Defined benefit schemes are also known as “gold-plated pensions.”
They provide scheme members with a pension that is intended to be guaranteed.
These schemes are becoming rare due to their cost – and if you have one, you should think very carefully before transferring from it as it is against the FCA advise to transfer them out.
It is also now required – by law – that anyone considering a transfer from a defined benefit scheme worth more than £30,000, including into an overseas scheme such as a QROPS, must have taken financial advice from an adviser qualified to provide UK pension advice.
While, transferring a DC schemes can be more advantageous to give more control of your pensions but would state that unless you are going with an FCA platform like Novia would opt for transferring it to a U.K. scheme.
I will do a quick comparison of the bond options and prices
Trust Options for an International SIPP
| Trust Name | Novia International Sipp | Momentum International | Sovereign International | STM International SIPP | IVCMSIPP | Harbour International SIPP | Fourth Plus SIPP |
| Set Up Fee (GBP) | 0 | 300 | 300 | 150 | 100 | 399 | 400 |
| Annual Fee (GBP) P.A rate | 180 | 500 | 500 | 325 | 465 | 399 | 400 |
| Establishment of Benefits Fee (GBP) | 0 | 250 | 250 | 130 | 250 | 150 | 150 |
| Income drawdown fee (GBP) P.A rate | 62.50 | 100 | 100 | 130 | 300 | 150 | 150 |
| Termination Fee (GBP) | 0 | 250 | 250 | 155 | 995 | 499 | 0 |
Above is a quick guide to the trust options for a SIPP for the platforms where your investments can be held here is an overview of the costs. This can be changed for the advisor’s fees.
Here are some of the trusts and links to the sites.
Baker Tilly
This is from Baker Tilly about the company:
- The scheme is managed by genuine pension professionals having many years of active pensions administration experience
- The scheme is being looked after by the longest established pension provider on the Isle of Man who is members of one of the world’s leading business advisory networks
- Members have access to a wide range of investment options
- The scheme has been issued with a contracting-out certificate and is, therefore, able to accept protected rights funds
- The scheme has been registered with HM Revenue& Customs as a Qualifying Recognised Overseas Pension Scheme (QROPS) and is therefore able to accept transfers from UK pension schemes
- The SIPP is competitively priced with a low establishment fee and fixed annual fee covering trustee, administration, and accounting charges.
IVCM
The IVCM Heritage SIPP is designed to provide you with;
- A means to save for retirement in a tax-efficient and flexible way.
- To make your own investment decisions regarding your pension fund in conjunction with your advisers in a broad range of investments subject to HM Revenue & Customs (HMRC) rules.
- To allow you to take a lump sum and flexible income in retirement.
- A lump sum, a pension, or both for your nominated beneficiary(ies) should you die before taking benefits.
- The option to take income from your pension without buying an annuity, now known as ‘Drawdown Pension’, subject to certain rules.
- To give you flexibility over the provisions for your nominated beneficiary(ies) upon your death including the availability of a lump sum if you are drawing under Drawdown Pension or to draw a non-taxable income in the event of your death (taxed if member aged over 75 at the date of death at recipient’s personal tax rate).
- To allow you to consolidate all your pension arrangements by transferring them into your SIPP.
Forth Plus
This is from Forth Plus guide:
The Forth Plus SIPP has been developed from a fresh perspective with an intimate understanding of the pension market in the UAE by a team of individuals who have been integral in its history and demonstrated a proven and highly successful track record.
As a result, the final product not only competes on price but is significantly more enhanced in terms of its technology, usability, and adaptability, as well as giving easy access to all the process stakeholders from the client through to the adviser. The Forth Plus SIPP offers high levels of control and security to clients designed to deliver a range of benefits including the following:
- The company is approved and regulated by the FCA following the thematic pensions review
- There are no legacy issues in terms of capital adequacy or non-standard investments held within the SIPP
- An extremely strong and industry-focused team with significant experience and understanding in both the UK and International markets across all sectors
Momentum Pensions
Momentum Pensions and their rebranded SIPP business iPensions Group offer QROPS, SIPPs, and SSAS solutions across the four jurisdictions of UK, Malta, Gibraltar, and the Isle of Man.
They also provide a low-cost QROPS solution for the sub £40,000 client, known as the Momentum Super Lite QROPS. The setup cost is £250 and there is an annual fee of £250.
This can be compared to their standard QROPS costs of £895 and £895, respectively.
STM Group
This is from STM PDF about the company
Listed on the London Stock Exchange ‘s AIM market, STM Group PLC was formed specifically to build a leading financial services group. This growth strategy is being achieved through acquiring, creating, and consolidating high-quality companies that offer related products and services from complementary jurisdictions; each providing our clients with innovative products and a high level of service. STM Group is international with a spread of offices strategically located around Europe. With offices in centres of excellence such as Gibraltar, Jersey, Malta, and Spain, this gives access to a geographical spread required to service almost all individual and corporate clients with interests on a global basis.
Sovereign Group
Sovereign is a market leader in the provision of pensions with a broad proposition that includes Self Invested Personal Pensions (SIPPs); Qualifying Recognised Overseas Pension Schemes (QROPS); Qualifying Non-UK Pension Schemes (QNUPS); International Pension Plans (IPPs); and Corporate Pension Plans.
The Sovereign Group offer QROPS, QNUPS, SIPPs, and International Pension Plans across five jurisdictions in Malta, Guernsey, Isle of Man, Gibraltar, and the UK.
Standard QROPS set up costs are £750 with £900 annual fees.
Sovereign is one of the keys, long-established and larger providers in the marketplace, and is able to offer a broad selection of options that some of the smaller firms are not able to match.
What Platforms to stay away from
Offshore bond and platforms these can have hidden commission and would stay for the most cases well clear of these.
| Bond Name | Fees Annual based on a 10-year plan | Dealing Charges | Establishment Charge | Surrender Charge | Upfront charges (what you pay on day one) | Admin Charge USD | Verdict | Personal Rating (5 stars) |
| Friends Providence International Reserve Bond | 1.5-2% | No | Yes | Yes | Yes 5% | 126 | A good brand name but with high fees | 2.7 |
| Friends Providence International Summit Bond | 1.6% | No | Yes | Yes | Yes 5% | 126 | High fees lack of liquidity | 1.9 |
| Friends Providence Zenith | 1.6% (add this uses mirror funds as well that can add 1.2% a year in chargers) | No | Yes | Yes | Yes 5% | 126 | Uses mirror funds would not be inclined personally to use this | 0.5 |
| Generali Worldwide choice option | 1.5%-3% varying on advisor’s coms | Yes | Yes | Yes | Yes 5% | Included in the fees | Reputable company but fees really do eat up on this uses in Singapore mainly. | 0.7 |
| Investors Trust Assess portfolio plus bond | 1% | No | Yes | Yes | Yes 3-5% | 90 USD | Not a big name as other bond options but a cheaper option also has ETFs in the funds | 3.9 |
| Investors Trust Fixed Income | 7 USD | No (Hard to deal out as fixed term deposit) | Yes | Yes | Yes | No | Low risk a higher interest fixed deposit rate from 1.5-3.6% | 3.3 |
| Old Mutual Collective Investment bond | 1-2.5% | Yes | Yes | Yes | 3-7% | No | A good company with moderate charges in the medium charges | 3.1 |
| Old Mutual Exclusive Bond | 1.5%-2.5% | Yes | Yes | Yes | 3-7% | 15 GBP | A respectable bond charges but as with them all a high cost that adds up if not used right. Mirror funds are also used. | 2.8 |
| Prudential Bond | 1-2% | Yes | Yes | Yes | 5% | 1% | With funds charges of 1%-1.5% this adds up. | 2.3 |
| RL360 PIMS | 1.6%-2.1% | Yes (first 10 free) | Yes | Yes | 5% | 0.2% | Popular choice for advisors expensive cheaper and better option are available for most personal | 2.2 |
Here are a few of the options for bonds. These can really add up with the trust fees, and I personally see better platforms options for most expats. Especially with those under 500,000 USD non-trust options. Any advisor that would advise one of the high fees products otherwise would be doing so due to the commission.
For further information about offshore bonds please read my articles on offshore bond reviews, low-cost platforms, SIPP guide, and 10-minute investment guide for expats.
I will give a brief review of the platforms used for your SIPP in the offshore market.
Platform Options with no surrender or period (Note some are bond options such as ITA) also so firms may quote these at higher than the base cost so will note the base costs.
| Platform Name | Location | Investment option | Commission | Charges | Rating | Verdict |
| Ardan International | Isle of Man | 2000-3000 funds | Yes, can be as can add 1% dealing and higher platform charges. | 0.4% | 3.8 | Can be expensive with advisors’ coms but if taken off a reasonable low-cost option online system is still slow |
| Investor Trust Access Portfolio | Cayman/Labuan | 3000 Funds | Advisor gets 0.5% of the 1% | 1% plus 450 Admin cost | 4 | A good online technology and fund range that can be low cost. But based in the Caymans. |
| Interactive brokers | United Stated | 5000+ Funds | Dealing coms | Depends on the value of the portfolio and how much you trade $8 a trade | 4.6 | A great option but more of a trading option than a SIPP or offshore pension plan. FCA not open to offshore clients |
| Capital Platforms/Moventum | Luxembourg/Singapore | 4000+ Funds | Depends on the amount being charged. This can used in a bond structure if so, stay well clear and go for the platform option. | 0.5-1.2% a year | 3 | A good location and a good online platform. |
| Novia | Isle of Man | 3000+ Funds | 35 USD per trade | 0.4.5-0.1% | 4.5 | A good option. A reasonable option for a SIPP. |
Personally on the above, I would only stick to Novia and Interactive brokers offshore as they have clear fees and advisors must be fee based. If you are, for specific tax reasons, looking for a bond options would go with Investors trust access portfolio plus for portfolios if you have over 250,000 GBP as all in cost around 1.2% platform and advisor cost (if the advisor doesn’t add anything extra this also included 450 GBP admin costs) as have 1% charge (which the advisor get 0.5% and 450 GBP admin charges also has trust and fund cost so the TER is likely to be 1.7% for this amount.
How much does it cost to transfer?
The fees on pension transfers differ depending on what option you have chosen.
Fee-based advice – This can be a flat fee, an hourly rate, or a percentage. Fee-based advisors act as a fiduciary for their clients. They have an obligation to work in the client’s best interests. This restrains them from a conflict of interest in selling products that are not deemed fit for the client.
The client must be given a variety of options regarding the portfolios deemed feasible for their level of risk and the advisor must assess all levels of risk prior to any recommendation.
Commission Based – Advisors earn money solely on the products they sell to clients. This is done from remunerations from the companies, funds and platforms. In the offshore world, these are normally in a bond-like structure from the companies described above.
The regulation on the products is getting significantly better and the commission on pension has been capped as of 2022. The regulation is still subjective.
Trustee Costs
These do vary depending on the Trustee, I have written a number of articles on the cost of Trusts in my SIPPs articles. Some of the better ones in my option as of witting in 2021 are Forth Plus which is 850 GBP one-off and 450 GBP a year or Novia that works out to be 180 GBP a year.
Platform and Bond Costs
The platform is another layer of cost, this is where the costs can add up. The platforms if the investment is based in a SIPPs https://investmentsforexpats.com/sipps-for-expats/
Or if it is based in a QROPs as it acts as a tax wrapper
The platform has the potential to help utilise the growth of your pension. As I have stated in a number of articles about investment platforms, the fees are cheaper, you have greater options, and they are superior in many ways to bonds. Most advisors who are after the commission would sell bond platforms as the fees can be as high as 11%.
Furthermore, the bonds offer no significant protection and offer the same tax efficiency. As it’s wrapped in a trust and many of the investment platforms are domiciled in the Isle of Man or other financial centres these bonds have been sold on.
Fortuitously, for investors, the regulators have stopped these bond sales.
Fund Costs
There are two types of fund cost to consider within a pension transfer which are, clean funds and commission paying funds.
Clean funds – This means that you have no entry or exit fees. The fund’s fees vary on whether the fund is passive or active. Passive funds such as Vanguard and Ishares cost from 0.2%-0.3%. Active funds can cost 0.6%-2% for ongoing costs.
Commission paying funds – Will pay an entry fee of 1% -5% for going into the funds, also you can add a trail of 0.75%. These funds also come with exit fees or surrender charges of around 4%. If you are seeing a commission advisor, check the ISIN number and go, see the fund on an independent rating agency such as Morningstar and check the rating of the fund performance and the ongoing and initial charge.
By knowing what type of fund, you will be going into, you will know more about the costs and be able to work out the overall cost and usually, it can be higher than you expect.
For an independent rating agency, my preferred ones are Morningstar https://www.morningstar.co.uk/uk/
Standard and Poor https://www.spglobal.com/ratings/en/
Case Study – Fee-Based Financial Advice
If you have an expat with a pension and put it into an International SIPP. You can’t set up SIPPs in the UK because you don’t live there so it would have to be an international SIPP.
If it was Fee-Based financial advice there would be an overall cost for advice and the transfer of the pension, then you will need to add any charges where there is an exit fee, entry fee and platform fees.
Case Study – Commission Based Financial Advice
- International SIPP – 400-600 GBP one-off and 180-500 on going
- Offshore Investment Bond – 8% Ongoing cost 1.5%
- Funds – 4% commission Ongoing cost 1%-1.5%
- Adviser Transfer and Advice Fee – 0%-1%
Luckily, the regulation has stopped putting pensions into bonds but still be aware of advisors are still trying to use these bonds. These bonds offer high commission and a lot of the time it is not for the benefit of the investor, it benefits the advisor more.
A few tips if you have transferred your pension
Get away from the bond options that have put in the first table above (if you have no high exit fees) and opt for platforms such Novia that cost 0.45% on anything under $500,000 or currency equivalent and are FCA regulated and fee only or Interactive Brokers.
Second look at cheaper trust the cheapest one in the market right now is Novia at 180 GBP.
Look at cheaper fund go passive in funds such as Vanguard or low-cost active funds such as Baillie Gifford.
Change advisor the advisor could be charging 1% that is fine in some companies that have seen when kept the TERs below 1.5% but like stated above many are paying 3-4% and the advisor may have already taken 5% commission in the bond go for a fee based only advisor.
If you have transferred, you pension into a platform and are unsure of the fee or been offered free advice please feel free to get in touch at info@investmentsforexpats.com
