The Top Advantages of a QROPS You Should Know


There are many things you can do to secure your retirement, granted, but if you would like to secure your loved ones’ future as well, one of the best things you can do is avail of a QROPS. A QROPS can come with some significant benefits, and it easily trumps other pension schemes if you think carefully about these advantages. So what kind of benefits can a QROPS give which other pension schemes cannot? Here are the top advantages of a QROPS you should know.

  • No need to purchase an annuity 

In general, about 75% of a pension fund in the UK has to be used to purchase an annuity, which could then provide a guaranteed or established income for the duration of your lifetime. But there are downsides to this: you will have low yields, it is subject to income tax, and once you pass on, the fund will not be transferred to your loved ones. Many pensions which are outdated will automatically fall into an annuity at a specified period. But if you transfer your UK pension to a QROPS, you can avoid these pitfalls, and upon your death, whatever funds you have not used can be passed on to any beneficiary you choose. 

  • No more inheritance tax

Apart from being able to pass on unused QROPS funds to your loved ones, you can also give your loved ones and beneficiaries another advantage: less inheritance tax. Even if you are residing abroad, if HMRC can classify or recognise the UK as the country you called ‘home’ when you passed, your pension will be subject to the death tax. The pension fund you will be passing on to your beneficiaries would then incur a death tax fee of as much as 45%. But you will not have to deal with this if you have a QROPS; with a QROPS, you can pass on your funds free of taxes. 

  • Better options on investments 

One of the most advantageous elements of availing of a QROPS is this: better options and choices on investments. With a QROPS, you will have a wide array of investment options from which you can choose compared with a standard UK plan or pension scheme. For example, even if a UK pension has a low investment charge, it will not often give you a wide array of fund choices. But even if some standard UK pensions offer a broader choice or selection of funds compared to some stakeholder schemes, they can come with some significant charges and fees, especially on plans which are outdated or older. 

The fact is that these kinds of UK pensions are often operated by insurance firms, which means that you are only making an investment on a small fund selection which is run and operated by the same insurance firm or another company where it has a vested interest. But the same isn’t true for a QROPS, where your options for investments are significantly broader and can give you more significant returns. 

With a QROPS and other tailor made pensions, as mentioned, you have more investment choices, and you can take your pick from various classes of assets across a worldwide market. This would include investment trusts, shares and stocks, bonds and gilts, commercial property, and cash. You are also not limited in the size of the funds of your QROPS, which means that even if you have already transferred your QROPS fund, you can still choose to grow it as you prefer. And, best of all, your contributions, as well as the actual fund, can grow – without the encumbrance of capital gains tax.