The post-Brexit Qrops landscape

Added 7th July 2016

International pensions such as Qrops are certainly going to feel the economic impacts of the UK’s decision to leave the European Union, but there will also be many other effects on these products, says David White, a founding partner at The QROPS Bureau.

The post-Brexit Qrops landscape

Here White lists the main issues facing the future of the Qrops market in the post-Brexit world.

Increasing number of expatriates

Those who voted Remain and who do not relish a future within a UK that is not part of the EU, may consider leaving the UK and will wish to ensure their pensions are best suited to their changed circumstances. Whilst some of these people will move to EU countries, many others will migrate to countries outside the EU. Wherever these people move to, this trend, if it occurs, may lead to an increase in demand for international pension solutions such as Qrops.

Freedom of movement of capital

Much has previously been made out of the fact that Qrops has a long term future due to the EU freedom of movement of capital rules – the UK government has not been able to restrict the movement of capital within the EU by making Qrops overly restrictive, even if it wanted to. Once the UK is out of the EU this could change and the UK HMRC may be able to introduce further restrictions.

Lifetime allowance planning for UK residents

One area which this may impact upon is the use of Qrops by UK residents for lifetime allowance planning. Once the UK leaves the EU, HM Revenue & Customs may be able to restrict the use of Qrops by UK residents, which they have not previously been able to do.

Flexible drawdown in Malta

Following the introduction of flexible drawdown into the UK pensions regime in 2015, Malta was able to avoid the "temporary "retention of the "70/30" rule (70% of the pension scheme to be used to provide an income for life), because it was part of the EU. Once the link has been severed between the UK and the EU, Malta may have to revert to more closely following UK HMRC rules and introducing the "70/30" rule.

Non EU Qrops

As stated above many UK residents have moved and will continue to move to countries outside of the EU. Many Qrops are not domiciled within the EU and so are unlikely to be effected by Brexit.

Taxation of transfers

Following an exit from the EU it is possible that the UK will continue to allow portability of pensions but introduce a tax on transfers, similar to the US system.

Restrictions on advice

The UK being a member of the EU has made it fairly straightforward for UK Financial Conduct Authority regulated advisers to advise clients within Europe under ‘passporting’ arrangements. The UK's exit from the EU could potentially make this process more difficult.

Gibraltar

One of the major Qrops jurisdictions is Gibraltar. Following the outcome of the EU referendum, Spain has called for the UK to enter negotiations over co-sovereignty. This would be a further chapter in the long running historic dispute between Britain and Spain over the sovereignty of Gibraltar.

Transitional period

The majority of the above potential impacts are unlikely to occur until after Brexit has taken place. During the interim period of at least two years, whilst the exit is negotiated, there is likely to be an increase in demand for international pensions solutions such as Qrops, while people have some certainty over the rules and the treatment of their pensions.

No one size fits all

As has always been the case the most suitable solution depends upon client circumstances and the regulatory climate at the time. The world changes, the country changes and the regulations change, and so the most suitable solution will change.

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Richard Hubbard

Group Editor

Richard Hubbard is the group editor at Last Word. He is responsible for the editorial content of International Adviser, Portfolio Adviser, Expert Investor and Fund Selector Asia. Richard previously worked for Thomson Reuters and has covered the financial services industry and investment themes from its offices in London, Singapore, Hong Kong and New York. Richard started his career at the Australian Financial Review in Sydney.

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