by Paul Beckwith
HM Revenue & Customs has blocked moves by Guernsey QROPS providers to reinstate pensions for retirement savers who do not live on the island.
QROPS is short for qualifying recognised overseas pension, which is a scheme that allows pension funds to be transferred from the UK to one of around 2,600 QROPS in 49 countries.
QROPS rules specifically blocking Guernsey’s S157E QROPS for off-islanders came into force on May 23 2012. The S157E pension was hastily drafted and passed by the island’s parliament to meet tough new tax rules aimed at halting QROPS tax abuse.
Guernsey was effectively ‘closed’ to new QROPS business by the deletion of more than 300 QROPS schemes from HMRC’s QROPS. S157E pensions never saw the light of day.
Industry insiders estimate at least one in three of all QROPS transfers out of the UK went to the island.
Jersey decides not to proceed
Two years after Jersey took the decision to prepare legislation aimed at enabling island pension administrators to look after the transferred UK pensions of individuals who have moved to a third country, it has shelved the draft law it had been working on.
A government spokesperson said the draft legislation had been withdrawn “as it does not meet the new UK QROPS rules”. “However, we are continuing to look at options for providing an international pensions offering,” the spokesperson said.
Jersey’s decision to back away from the QROPS market, at least for now, comes after the Qatar Financial Centre Regulatory Authority in July decided against amending its regulatory framework to allow QROPS to be administered by Qatar Financial Centre-regulated entities.
Isle of Man ditches 50c QROPS
Isle of Man QROPS are going back to basics after the recent HMRC tax crackdown closed some offshore pensions to new business. HMRC de-listed 18 Isle of Man QROPs out of 191 schemes for failing to meet new qualifying regulations on April 6.
Several of the schemes were operating under the offshore financial centre’s 50c pension laws that purported to pay more than the required 70% of the retirement fund as a tax-free lump sum. Now, pension providers on the Isle of Man have dropped their 50c schemes and restarted marketing their tried and tested EET scheme as QROPS.
EET, short for Exempt Exempt Tax, is an accepted European Union pension standard that includes QROPS. Pensions running as EETs offer exempt contributions, exempt investment income and capital gains and taxed benefits.
Crucially, paying taxed benefits to residents and non-residents at the same or similar rates is a key factor under the new HMRC QROPS regime. Basically, the Isle of Man has reverted to an offshore pensions formula that is proven to comply as a QROPS.
Malta publishes tax guidelines
The Maltese Inland Revenue has published new guidelines for QROPS, clarifying the jurisdiction’s position in terms of its tax compliance. One of the most significant aspects of the new guidelines is a section which stipulates that beneficiaries of a Malta-based scheme will need to submit an annual tax return.
The client will have the opportunity to apply for a tax exemption if they are in a country with which Malta has a double tax agreement (DTA) – evidence of the residency will need to be supplied.
If the client happens to be in a country with which no DTA with Malta is in place, they may end up paying income tax, in which case a QROPS may not be the best course of action.
The implication of these new guidelines will make tax evasion almost impossible.
Gibraltar QROPS
Gibraltar QROPS are all systems go after politicians voted unanimously to update pensions rules that they believe will comply with UK tax laws. Gibraltar has held off accepting QROPS transfers over concerns that retirement savers could face hefty tax penalties for flouting strict pension rules even though some schemes are listed by HM Revenue & Customs.
A revised bill was passed that the territory hopes meets the concerns of fund administrators and is acceptable to HMRC. QROPS providers expect to start accepting transfers from UK pensions.
The new law has a flat 2.5% tax charge on all Gibraltar pensions income. Other features of Gibraltar QROPS include a maximum 70% draw-down of any transferred funds, a minimum retirement age of 55 years old unless the saver suffers from ill health and a special clause that bars transferring funds in a Gibraltar QROPS onwards unless the receiving scheme complies with Gibraltar pension rules.
Finally, there is a selection of QROPS that are fairly priced, with good administrative back up, a wide investment choice and without unfair financial penalties if clients wish to transfer to another jurisdiction or scheme provider.
When considering transferring your UK pension to QROPS, it is imperative that you seek advice from a qualified financial adviser.
This facility is not suitable for all expatriates, and we recommend that advice is sought before one makes any commitment. Blacktower seeks to ensure that our clients receive the advice suitable for their specific circumstances. Please contact us for further details 289 355 685.
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Paul Beckwith is an International Financial Advisor working with Blacktower Financial Management (International) Limited
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