Pensions deficits could signal further rise in demand for QROPS
Deficits reported by UK pension schemes reached up to £111bn last month, £3bn higher than in 2013. This increase is regardless of the rise in asset values reported in March.
These figures are somewhat disappointing, as even though the FTSE 100 index increased in April by over 3 per cent, the pension deficits are still on the rise. A fall in corporate bond yields and an increase in inflation anticipated by the market, also played their part in the pension scheme shortfall.
So what does this mean for individuals? Are their pensions safe?
Even though defined benefit pensions are renowned as being one of the safest, and indeed generous schemes on offer, many have run into difficulties or even ceased operating, mainly due to the high running costs for employers.
One way people can mitigate the adverse effects of a pension scheme deficit would be to transfer into an HMRC-recognised QROPS (Qualifying Recognised Overseas Pension Scheme) if they are based outside of the United Kingdom, or are considering moving overseas.
QROPS have experienced a year-on-year growth since they were introduced in 2006, and are set to become even more in demand as knowledge of their vast benefits increases and as the market matures on the whole. QROPS have the potential to be more tax efficient than pension schemes based in the UK, and one of the primary advantages is that members can opt for their pensions to be paid out in the currency of their choice, therefore eradicating potential costly exchange rate losses.
To my mind, as the number of people seriously contemplating moving abroad to enjoy their retirement increases, and as the market continue to mature, a growing number of individuals will transfer their pensions to a QROPS in order to reach and often exceed their long-term financial goals.
As a cross-border specialist in the financial industry, deVere Group has been at the forefront of the QROPS market for the past eight years, and I am confident that as the sector continues to gain momentum, and as the government is more than likely going to carry out further raids on pensions and age-related benefits, the demand for QROPS will continue to soar.