Gibraltar has issued a statement saying that its pension fund administrators have been “given the green light in writing” by HM Revenue & Customs to resume handling qualifying recognised overseas pension schemes.
The announcement comes less than two months after Gibraltar’s Parliament approved proposed amendments to its income tax legislation that were aimed at addressing certain concerns of Britain’s tax authorities that had caused Gib’s pension fund administrators to suspend UK pension transfers beginning in September 2009.
HMRC was said to have concerns over Gibraltar’s 0% tax on the pension income of residents over age 60, and the pension fund administrators did not want to risk incurring significant penalties by continuing to accept pension transfers while the uncertainty existed.
A spokesman for HMRC said that as a matter of policy the Revenue did not comment "on individual jurisdictions".
In a statement, Gibraltar’s Association of Pension Fund Administrators cited “a letter dated 31 August 2012”, in which “a senior HMRC official confirmed [that] ‘there is no HMRC objection to Gibraltar QROPS commencing or resuming the acceptance of transfers from UK registered pension schemes’”.
Steven Knight, GAPFA chairman, said: "We have been confident that Gibraltar's schemes for imported pension schemes are fully compliant with the UK's intention to ensure that the majority of any fund is used solely for providing an income for life in retirement, and this official HMRC endorsement has made worthwhile our past voluntary suspension of activity in this area".
Knight is also chairman of Castle Trust Group, a Gibraltar-based pensions specialist.
The GAPFA statement went on to note that Gibraltar is thought to be “one of a limited number of jurisdictions to have received formal notification from HMRC that its QROPS meet the UK requirements”.
“This will provide a greater degree of certainty for pension scheme members and their advisors than just reliance on a scheme being included on an HMRC website listing of notified schemes,” it added.
As reported, following an election last December that put a new administration in charge of Gibraltar’s government, reviving the territory’s dormant QROPS industry was cited as a priority.
In March, Gilbert Licudi, Gibraltar’s new minister for financial services, told International Adviser that he had draft legislation in hand for a new QROPS regime that was understood to be a “low tax” scheme that would work for Gibraltar residents and non-residents alike, rather than a one-size-fits-all, no-local-tax-due-on-benefits-paid QROPS format, as had just been unveiled at that point in Guernsey, and which ultimately was rejected by HMRC.
In its favour as a QROPS jurisdiction, Gibraltar is, unusually for a British overseas territory, considered a member of the EU for most things, including financial services, unlike Guernsey, Jersey and the Isle of Man (but like Malta). It is also said to have a more flexible, and thus attractive, regime for QROPS administrators than some other popular QROPS destinations.
According to the most recently published HMRC list of QROP schemes, Gibraltar has 10, of which four are operated by STM, the AIM-listed, Gibraltar-based specialist. Malta also has 10, of which two are STM schemes.
‘Keen to avoid discrimination’
In its statement, the GAPFA said one of its first priorities would be to ensure that there was “no discrimination between services and products available to both residents and non-residents of Gibraltar”.
GAPFA is close to finalising a Code of Practice that Knight said will be compulsory for all of the organisation’s members to agree to, in order to “help ensure that there are no grey areas”.
It said it has been liaising with both the Gibraltar government’s tax office and the territory's pensions regulator, and vowed that it would “bear in mind continuing HMRC requirements”.
Details of the Gibraltar QROPS
Under Gibraltar’s pensions legislation, pensions and pension commencement lump sum payments may not be taken before the age of 55, and pensions will be taxed at 2.5%.
At least 70% of the pension must be set aside to provide regular pension payments to the individual in question.
Transfers out of Gibraltar QROP schemes will only be permitted to jurisdictions with pension regimes “at least as” robust as Gibraltar’s.
Knight said his organisation would monitor events, and would be prepared to make changes and update its code as necessary, “to ensure that members of the public and pensioners can have confidence in Gibraltar-based QROPS being managed to the highest standard possible", and to ensure that “non-compliant rogue operators will not be able to use Gibraltar in any way".
News of Gibraltar's having been given a written assurance that it scheme met HMRC's approval is likely to come as a surprise to some with QROP schemes in rival jurisdictions, and not only because it is rare for the Revenue to issue such assurances.
This is because the UK government has previously stated that “where the country or territory in which a QROPS is established makes legislation or otherwise creates or uses a pension scheme to provide tax advantages that are not intended to be available under the QROPS rules, the Government will act so that the relevant types of pension scheme in those countries or territories will be excluded from being QROPS”.
Some have suggested that Gibraltar's amending of its pensions legislation could be seen as falling foul of that clause.