But last week’s Spring Budget heralded an opportunity for advisers, as clients need advice more than ever. The dichotomy for advisers is earning a living while not relying on purely transaction based remuneration.
This is aimed at demonstrating to advisers, who wish to carry on advising on UK pensions, how they can add value to a client through risk based options and how that leads to remuneration that is not transactional based.
Advisers have considered Qrops from a product perspective based upon perceived benefits and, until now, the headline benefits have often supported the product.
On 8 March the UK chancellor announced HMRC would seek to apply a 25% tax charge on several types of transfer, or indeed at any point in the next five years if circumstances change.
It is critical to understand that change in the circumstances could be due to changes in the EEA and in relation to Brexit as well as for individuals.
For example, let us examine advice for an EEA based individual holding a Euro denominated Qrops, who moves to a non-EEA country such as Switzerland.
In the future, this would trigger a 25% tax charge from a pension transfer up to five full tax years before.
Or consider someone with a pension in Gibraltar who is not retiring there. What happens if Gibraltar is no longer part of the EEA?
Or how about an individual returning to live in the UK after Brexit who holds a QROPS in the EEA; will they have a 25% tax charge applied in the future?
Will some grandfathering rule cover this? If so, it is not prescribed in the legislation.
These scenarios are very real and a potential threat to all clients, financial advisers and trustees.