The UK’s new labour party has launched a string of new reforms aimed at the UK Pension system that are being called a “Big Bang” for private pension funds. In addition to tackling the “lost pots” problem that we have mentioned in a previous post, the new reforms aim to maximise the potential of the pension system by “shifting investments to productive assets.” Another problem being addressed is the fragmented nature of the UK Private pension system with thousands of different employers and pension funds. This makes it hard to consolidate the pension system as a whole and an effort is being made towards this consolidation. The new pension schemes bill even featured in the King’s speech that opened the new session of parliament, which was a surprise to some.
This may be because many feel like the new bill mostly continues what the previous government set in motion, and lacks any specific changes that would make this approach unique to the new labour party. There also seems to be lack of any mention of timeframes for these changes to be set in motion. Additionally, people familiar with the lost pots problem feel it will take years to solve as the process of automatically consolidating them all into a macro pension pot is not an instant process and takes years of consultation. This process is already under way and has been for years, the problem (like we mentioned in our previous post), is that as younger people shift jobs more frequently and work for shorter durations, the number of “micro” pension pots continues to grow.
Now as far as shifting investments to productive assets goes, we at QROPSdirect.in have been saying this for years. Why keep your pension stagnating in an economy that isn’t maximising its potential. While the new labour party aims to consolidate the economy by using pension funds to invest in “high growth” companies in the UK, the funds could take years to consolidate, and even longer to be invested. Additionally, limiting investments to only high-growth UK companies is a lot like putting all your eggs in one basket. While high growth is a good thing, a diversified portfolio based on your risk profile is ideally what you want if you want to retire comfortably. High growth is usually high risk and while risk can be measured and even mitigated, there are other economies out there. In fact, If you’ve lived and worked in the UK, and have since moved back or are planning to move back to India, why not invest your pension back home?
QROPS FAQs
When can you opt for QROPS?
You can opt for QROPS if you have a pension fund in the UK which you wish to transfer to India, under the condition that the Indian pension fund you choose to transfer to, is registered as QROPS with HMRC.
Does it cost anything to transfer my pension fund from the UK to India?
Not only is the transfer of pension funds to approved pension schemes in India tax-free, but you also nullify any loss that would potentially be incurred due to currency exchange rates and similar complications.
What documents are required for QROPS transfer?
The forms that are required are Cash Equivalent Transfer Value (CETV) forms which include:
- Transfer Quotation
- Transfer out discharge forms
- Lifetime allowance form
- APSS 263
- Any other form as per fund manager requirement