The legislation, issued at the end of last month, is currently subject to consultation, and will allow up to 100% lump sum withdrawals from Qualifying Recognised Overseas Pension Schemes (QROPS), removing the current need for a scheme holder to use 70% of their funds to provide an income for life.
Mark Sanderson, chief operating officer at Brooklands Pensions, said the changes will benefit Gibraltar, adding that the jurisdiction last year made changes to its Income Tax Act to allow QROPS providers based there to adopt such changes with “minimal fuss”.
“Not convinced”
However, he added that he was “not convinced” that Malta will change its legislation to accommodate the changes entirely, owing to its recent implementation of alternative arrangements.
“As far as allowing the same full flexibility as UK schemes goes, it would appear unlikely that Malta will amend its legislation in light of the fact that it already has an, albeit restrictive, version of this already known as programmed withdrawals,” he said. “However, we should know more early this year.”
Also included in HMRC’s proposed changes are conditions that require pension benefits payable under a QROPS that relate to funds that have received UK tax relief to be payable no earlier than they would under rules that apply to a UK registered pension scheme, which is currently set at 55.
Sanderson says this change will affect Malta, which currently has a minimum retirement age of 50.
“While Malta is not subject to the “70/30” rule, QROPS providers based there will be required to ensure that the minimum retirement age is raised to 55 for any plan that holds UK tax relieved monies,” he said.
Similarly, Paul Davies, director at Global QROPS, says the jurisdiction is likely to adapt to the minimum age proposals.
“This was previously one of the reasons to use a Maltese QROPS,” he said.
He added that the changes will “bring QROPS into line with the recent changes made to UK pensions schemes,” although he said the process of legislative alteration for foreign jurisdictions will not necessarily be a “simple task”.
“Strong position”
Stephen Ward, managing director at Premier Pensions Solutions, said the news represented the “biggest change to QROPS since they came into play”, adding that overseas jurisdictions will now have to consider whether or not to adapt to the new UK legislation.
In particular, he said the changes will leave New Zealand in a “strong position” as a QROPS jurisdiction because its local legislation does not impose withdrawal restrictions, which will allow it to take up the legislative changes with immediate effect.
“Other jurisdictions may need to adapt their legislation to maintain a strong market position,” he added.
Gary Boal, managing director at Isle of Man-based QROPS provider Boal & Co, said his company has responded to the consultation and it currently waiting for a response.
“What I would say is, until there is clarity, it would be rash for anyone to form a judgement right now,” he added. “We await to hear back from HMRC and hope it is soon. Once we know HMRC’s position, we will come to a considered view and will make that view known to IoM Government through the appropriate channels.”
