When you consider the major benefits of a QROPS Pension Transfer, costs should not be the focus, although you should definitely make sure you understand them.
Due to the fact that the benefits are so immense, many companies that offer QROPS Transfers have charged exhorbitant fees, and you need to make sure that you understand the charging structure before you proceed with a QROPS Pension Transfer.
One of the most important considerations with a QROPS, is the jurisdiction and flexibility provided, rather than the cost. Thus, although you can get extremely affordable QROPS plans, you need to ensure that they are in the best jurisidiction and offer the level of flexibility you require.
General QROPS Pension Transfer Costs:
- If you look at the costs in terms of a percentage of the fund value, then larger the fund value, the lower the charges.
- Each specific QROPS Pension Transfer scheme has its own charges and depends upon various factors.
- Before deciding on a specific scheme closely examine the benefits and flexibility that they offer.
- In the instance of a QROPS, cheaper definitely does not always mean better, and you need to carefully look at the specific scheme. If you’re going to have a medical operation, would you choose the cheapest or the best doctor? The same applies with QROPS.
- There are generally three costs that you need to be aware of in most QROPS schemes. These are on average as follows:
Setup cost – ±1% of the value.
Annual Management Charge – £1000 – £1500 p.a.
Underlying Fund Charges – depend on the specific funds chosen.
- Remember, that if you consider the benefits of a QROPS Pension Transfer these costs are insignificant.
- You need to take cognizance that with many pensions in the UK they are in a very low or even negative growth (see articles in Resources), and that upon death 50% or more of the funds generally return back to the life company.
- Always ask your financial adviser to explain the specific QROPS Pension Transfer charging structure to you that they are recommending.