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QROPS (ROPS) Fees, Charges and Commissions Explained

Written on 20 July 2022

The theory behind offshore investments is that it permits an investor to get access to better potential returns on their investment and also find opportunities to minimise their tax liability.

This is no different with a QROPS (ROPS).

However, in the UK, financial advice is strictly regulated and advice can now only be provided under a fixed fee charging structure (whether per hour or per transaction). Offshore financial advice is still predominantly offered on a commission basis and therefore can be incredibly lucrative for the adviser.

It is important to understand that that even if the funds perform as expected (in some cases, up to 11% returns) the fees, charges and commissions for a QROPS can start to eat into your return on investment. This could significantly reduce or eliminate any earnings on your pension funds, and it's normally down only to the adviser being more interested in their commission rather than what is best for you. 

Unfortunately, when the individuals discover what's actually happening it’s often too late to take immediate action. However, once the tie-in periods are over, they are free to move. Therefore be very wary of anybody pushing long term tie-in periods.

The below information is designed to help you ask the right questions of any advice or adviser.

Overseas transfer charges

On 8th March 2017, the UK government introduced a new overseas transfer charge which could affect many QROPS transfers which were requested on or after 9th March 2017.

To find out more, please read our detailed article covering overseas transfer charges >

QROPS fees, charges and commission structures

Any investment will incur an annual charge and in the case of a QROPS, this will be taken from your pension. However, remember that in a lot of cases the fees will actually be based upon the initial value of your pension, rather than recalculated year on year. This could be a benefit to some but not all.

You may also be liable for higher annual charges on the investment platform if your adviser takes maximum commission as this is how some bond providers pay for your advice.

If a QROPS transfer is managed correctly, the charges your experience should not be dissimilar to your current pension and the range of investment options should be much greater than those available through a SIPP.

It is important that you should also never pay for an investment such as a structured note or mutual fund if you are being invested in life bonds.

Ultimately, when it comes to QROPS charges, transparency is key. The more details held within the report the better. When reviewing your report, look for the four tiers, namely:

  1. QROPS charges
  2. Life bond charges including annual fee, admin fee, dealing costs
  3. Cost of the underlying ETF’s, Mutual Funds, etc…
  4. Ongoing advisor charges. You should always ask questions about charges and commissions.

The types of QROPS advisers

There are two main types of advisors using UK FCA terminology, “Tied” or “Whole of market”.

"Tied" or "Restricted" advice is when products being advised upon are that of the company or from a restricted panel of affiliates. 

"Whole of market advisers" or commonly known as "independent financial advisers" will not be under such obligations and are free to find the most suitable fund for you and your risk profile.

Warning: Some firms have used the term "independent" meaning they are not owned by any major financial firms but, based on FCA guidelines, would be considered "tied". If you are in doubt, don’t be afraid to ask.

Size of firm doesn’t always matter

Big is not always better when it comes to financial advisory firms. Even if they are regulated, the regulator will only cover their jurisdiction. The FCA do not regulate advice offered by a UK firm to those living outside the UK, therefore you would not be protected as you would expect.

While you can take more comfort from an adviser who is regulated by an organisation like the FCA, fewer UK firms will deal with non-residents and this has become more apparent since Brexit.

There are, of course, some exemplary larger firms, and you can spot the difference between the good and the bad. For example, a true financial adviser will not work from a script and should be able to answer any financial question. If they are qualified, they should be able to explain their qualification – and you should not be scared to ask and investigate.

Typical QROPS concerns of expats

There are now hundreds of millions already invested into QROP schemes around the world. There are also a number of people who are concerned about their investment, or the way their QROPS was "sold" to them.

Some of the more common issues and concerns advisers in our network assist with include:

  • I don't think I'm being told the whole story
  • The charges are much higher than expected
  • The pension doesn’t appear to be performing as expected
  • I’ve stopped receiving an income from my pension
  • My adviser has disappeared

If any of these apply to you, why not review your QROPS to see if you have been incorrectly advised. It may be possible to:

  • Change the QROPS or move it back to a SIPP (or other financial product)
  • Change the life bond
  • Change the underlying funds
  • Or a number of combinations of the above.

Even if you are in the process of making a decision, getting a second (or in some cases third) piece of advice could save you a significant amount of money - and help you avoid a lot of frustration.

Making the right decision

A QROPS can still a great product for non-UK residents with UK pensions, providing that the right advice is taken at the right time. And the right advice is dependent on being presented with the right information and recommendations.

​When it comes to choosing a financial adviser, there are one key thing to remember: not all advisers are truly independent. Some are tied to specific investment options, either by the organisation they represent, or greed for higher commissions.

They will often still label themselves as independent, but if you are ever unsure if the advice you've been given is independent, or maybe some information has been hidden, you should always seek a second opinion before making a decision.

It's important to add that commissions are not bad in themselves. They are a legitimate way of paying for the advice on offer from your pension, rather than paying up front fees out of your pocket.

Also, in many cases the commissions may actually be lower than a fixed fee service. Issues only arise when commission structures are abused, and that is down to the individual adviser and their firm.​

Testimonials from people who have used this pension advisor introduction service

The consultant who contacted me was extremely helpful and went out of her way to get advice from someone else to answer my particular question.

Elizabeth S. United Kingdom, Pensions, QROPS

I was extremely dubious and cautious going into this process. I have two pension pots in the UK that l have been trying to consolidate and rebalance for over a year with nothing but stalling and red tape from the two companies in the UK.

In desperation l followed up a lead from Google. I am glad l did. I will now be able to manage MY money from the US with an engaged and informative partner, instead of dealing with people who have zero interest in growing my accounts.

It’s a big relief and l look forward to developing this relationship wrt the rest of my retirement planning as part of my portfolio. Thanks so much for your help and referral. This is a legitimate organization with the expertise and support expats need.

Joanne E. United States, Pensions

Very good advice, very professional and knew the subject matter in depth.

Ian M. United States, Pensions