Qrops Or Uk Annuity?

Which is best? Firstly do remember that each individuals circumstance is different

. So you must take independent advice when applying this to your own circumstance. This article is aimed at expats who are in the position that QROPS may be the right course for them, and is intended to help them understand the difference between the two vehicles as an income provider. Even if you are many years from retirement it is important that you understand these differences.

Lets start with annuities. What are they? In simple terms an annuity is a promise to pay you an income for the rest of your life. You obtain this in return for a set amount of money. They exist because governments do not trust you to manage your own money in retirement, and the companies providing them make lots of money out of them. Once you hand your hard earned savings over, that money has gone, never to be seen again. There are lots of variations with regard to annuities. However in reality the majority of people chose a standard level single life without guarantee. The reason for this is simple. It pays the highest annual income.

If you have shopped around and found the highest paying annuity you may feel pleased with yourself. But do you really understand what you have committed too? Most people do not. Your income from it may seem OK now. The sales hype is that your income will never go down. That sounds great! Hold on a minute, it also means that it will not go up. However the price of gas, water, electricity, food, basically everything goes up every year. So what you have is a guarantee that you will be poorer each year.

Do you know what happens when you die? The income stops. It is not paid to your wife or partner, and no money is returned to your estate. Its gone! This means that you cannot leave it to your children either!

Let us compare this in the case of a QROPS. A QROPS does not require that you purchase an annuity to provide an income in retirement. Your money can remain invested. This can be in high earning funds that are not linked to the stock market. It is possible that it can produce a higher level of income than that provided by a standard level single life without guarantee annuity. As your money is still invested it can continue to grow. This means it could provide a growing income in retirement. It has the flexibility to be changed to meet your changing needs. And when you die the money can provide an income for your wife or partner. Or it can go to your children.

Most importantly remember that once committed to an annuity you are stuck with it. Please do take independent advice on any pension transfer. You cannot afford to get this wrong, get it right first time.

Do not be tempted to undertake a QROPS transfer without advice, as it will end in tears. For example an advertised low cost QROPS costing 300 per annum, can in fact cost you thousands of pounds for an inferior solution. The additional costs are there if you know where to look in the very small print. However quite often you will not be given the terms of your QROPS until after your transfer has been done. You have been warned!

by: Doctor finance

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