QROPS or QNUPS?

QROPS or QNUPS, what is best for me? What are all of these Q-acronyms that I keep hearing and having pushed at me?

Firstly, the acronyms themselves:
QROPS is a Qualifying Recognised Overseas Pension Scheme.
QNUPS stands for Qualifying Non-UK Pension Scheme

So on the face of it, they seems pretty similar right?

Well, yes and no. They both share similar traits in that they are both Qualifying, both in their structure and the jurisdiction that they are domiciled, such as Guernsey, the Isle of Man or Malta and they are Recognised by the UK revenue and customs as schemes designed to create a pension income for those who hold them, and to comply with this, they both must earmark 70% of the total pot at retirement to provide an income for their holders.
Both can also accept pensions transfers from UK occupational and private pensions.

So what is the difference?

A QROPS is a cash-based pension scheme. It can invest in cash based investment structures and generate cash returns based on the desire of the holder to invest in a range of risk-rated financial products to generate the returns they are looking for in retirement.

QNUPS is where things get a little more interesting. A QNUPS is basically a cash QROPS wrapped in trust. This trust now allows the QNUPS to hold physical assets, such as property and a whole range of other assets outside the QROPS, but inside the trust. As an example, this property can be bought, sold, rented and leased in order to generate returns that may later provide a retirement income for the QNUPS holder. This trust also allows tax to be deferred, as when the assets are disposed of, any tax due on the asset disposal is rolled up.
To put more detail to this, the QNUPS holder owns the QNUPS and the trustees hold the assets on their behalf. This means that from a tax point of view, the QNUPS owner has not actually bought or sold anything, but their QNUPS has grown in value.
This structure can be used to massively boost returns for your retirement income as gains are realised gross of tax and full profits can be reinvested without losing vital revenue generating profit to the tax man.
This makes QNUPS a much more efficient way of managing your portolio than a series of directly-owned assets which will be liable to capital gains taxation upon every disposal.

Of course it goes without saying that you may also be able to leave your QNUPS assets to loved ones with little or no tax due as well.

To learn more about QROPS or QNUPS for your retirement pot and to protect your assets. Talk to a qualified financial advisor, who will be able to give you more information about the options available to you.

What is best advice?

Best advice should be about what is best for a client and in their best interests.
This is especially important when it comes to pension planning and advice about pension transfers as the entire income for the client for their next 10, 20 or even 30 years of life after retirement will be funded from their pension plans.

There are plenty QROPS of companies and schemes out there that will try and tell you that you can move your UK pension to a jurisdiction where you can take a 100% lump sum and take all of the money into your bank account - but is that best advice?
No, I don't think it it, and you shouldn't either. If your financial advisor is using this angle to sell you a retirement product, then perhaps you should question his motives?

Okay, so you can buy a great new house or a car with your 100% lump sum when you retire, but how are you going to feed or look after yourself for the next 20 years or more? You can't eat bricks and a new car might get you to the shops, but if you've got no income to buy anything when you get there, then you have a major problem.
Advising on QROPS transfers to pension busting schemes is not good financial advice and it's certainly not retirement planning.

If you need a pot to buy your home at retirement or a new car fund, then this should be arranged by your financial advisor and a specific savings fund can be established, but pension busting should be discouraged.

UK HMRC is actively looking at QROPS juristictions that allow pension busting and may soon be de-registering them from the list of recognised and qualifying schemes.

Don't however confuse this with Pension Commencement Lump Sum or PCLS. This used to be known as the 'tax-free lump sum' and is a % of the pension pot available to you at commencement of your retirement earnings so that you can pay off your outstanding liabilities and enjoy your income with minimal outgoings.
This should have been priced into your pension planning so that your income to live on for the rest of your life is not affected.