nun

The often very poor quality and inflexibility of UK pensions make QROPS seem attractive, but they are notoriously expensive and you are often jumping from "the frying pan into the fire" with them.

They are not applicable to a transfer to the US or for anyone who is a US tax payer. If you are a US tax resident and have a UK pension it has US tax deferral because of the US/UK tax treaty. If you move using QROPs to somewhere like Malta you may well lose that US tax deferral.

If you have a UK Government pension you are very lucky and I would leave it alone until you can take income from it.

mikelincs

Why would you want to get someone else to transfer the monthly pension, and pay them for the privilege, when the Pensions service in the UK will do it all, for free, and at the best rates, all you will see in your bank statement is a deposit, in dollars, and no transaction charges.
It's a no brainer to use someone else, when the provider will do it for free.

sir_eccles

Colin, step away from the keyboard.

Tell the Civil service pension people your American bank details, wait for money to arrive. That is all, anything else will cost you dearly.

colin_w

LOL! Will do! Thanks!

dunroving

There is one possible reason to avoid what everyone seems to be saying (which in general, I agree with - why pay fees and get a bad exchange rate when the government will transfer it at the market rate?)

Just in the past 5 years or so, the exchange rate has swithered from below $1.50 to over $2.00. Admittedly, these extremes only lasted for a few weeks or months but within the generally accepted band of about $1.50-$1.75 (-ish), a UK pension of £10,000 p.a. could equate to anything between $15,000 or $17,500 p.a.

So, for someone who doesn't need the money urgently every month and who doesn't mind farting around with XE.com and the like and keeping an eye on the markets, it at least would allow a bit more control over what rate you get.

Might just be swings and roundabouts, but worth thinking about.

colin_w

Thanks! Actually the reason the UK Pension Transfer LLC site looked interesting to me is their claim:

"If you are a member of a UK occupational scheme it is entirely possible that, instead of the real investment growth of your pension funds, they are only being credited with the lesser of 5% per annum or the Consumer Price Index (CPI). Typically CPI could have averaged as little as 2% over the last few years. Your former employer can legally keep any additional increase. For example, well-managed pension funds have historically increased by 8% to 12% per annum. In other words, you can quite legally be shortchanged."

...i.e. by "liberating" the money one could (if their claim is true) get the full return on investment instead of 2-5%. Having read sir_eccles caveats above, I'm skeptical about their claim though.

nun

Claims like that are seldom realized and they are a meaningless comparison as they do not account for the different risks of the investments. They also omit fees and expenses. To do a comparison you would need to do an actuarial calculation on your final salary pension to come up with the overall investment gain and then compare that to an asset allocation of similar risk.

Having a guaranteed UK Government pension is a great benefit. Use it for the fixed income portion of your retirement income. Greed is a very dangerous thing in investing as it causes people to take ridiculous risks.

I reiterate the comment to "step away from the keyboard" and forget any thoughts of QROPS as a US tax payer. Leave your UK Government pension alone and be happy that you have it.

Pulaski

But you have a "defined benefit" plan, which isn't linked to the value of any investment. As noted previously, they are very few valid/sensible reasons to swap a guaranteed payment stream for something that will be at risk of stock market swings and credit risk. Imagine what would have happened if you had cashed out your pension in early 2008 and placed it an an "at risk" investment! IMO that web site is peddling the investment equivalent of snake oil. As Sir Eccles said earlier, "step away from the keyboard".

Maybe you don't remember, maybe you were already out of the country, but there was a major scandal in the late 80's and early 90's over pension mis-selling, and it continues to be a problem where salesmen paid on commission con people into taking bad decisions based on overstated or nonexistent risks. Please tread with extreme caution.

nun

I generally agree with your comments. There are some pretty terrible UK pensions schemes and it's important to understand the difference between a final salary scheme and a defined contribution plan where the investments are managed for your direct benefit. You need to runs some numbers and see the value you are getting being aware of risk/return ratios. My take on QROPs is that they are seldom good value because of their cost and the management fees charged. Of course that goes for many UK pension plans too. Generally UK Government pensions are good value and if the OP vested in theirs a few years ago it's probably going to be a fantastic benefit so don't mess with it!

mikelincs

Many thousands on NHS employees were sucked in by the promises of these schemes, despite warnings, and, where I worked, 'financial advisors' from these companies were banned from hospital property, particularly nurses homes, as it was the nurses that were being roped in to these very poor deals.

dunroving

Have to reiterate what has been said by others - most defined benefit (final salary) pension plans are gold-plated and far superior to other pension plans.

You can find examples of people who have a better pension but that is usually the result of a lot of risk-taking and a lot of luck. My US defined-contribution plan from 9 years of college teaching in the US is probably "worth" about one third of my UK final salary plan from the past 7 years, despite the fact my US plan has been "growing" (Ha!) over a period of almost 17 years.

colin_w

Thanks! I have stepped away from the keyboard. I fact I am typing this using a long bamboo stick that I borrowed from the garden.

nun

I hope you don't take that advice literally

It's good to ask questions and to use the internet to find information. However, it's interpreting the information you find that's important. Luckily there are plenty of folks on here that have actual experience of pensions and retirement as British expats and are advice is free....and usually pretty good.

colin_w

Nah. Just attempting a little humour... maybe it doesn't come through in a text-based medium... I'm very happy with all the pointers! Thanks again!