Under the new rules, which were effective from 27 April, Guernsey-domiciled pension schemes will be allowed to provide an individual with full commutation if they are over 50 and their total pension schemes do not exceed £30,000 in aggregate.
Furthermore, the new rules state that to “ease administration for individual schemes”, if the fund value within the Guernsey scheme does not exceed £15,000, the administrators can allow full commutation without taking into account the value of funds in other schemes – the responsibility for this would then lie with the individual.
Paul Evans, managing director of Brooklands Pensions, which has a Guernsey-based QROPS, said he fears this new legislation could be in danger of jeopardising the QROPS status of the jurisdiction.
“I am not saying that this new triviality rule definitely will remove Guernsey as a QROPS jurisdiction however, it does seem to go against HMRC legislation and therefore I would like confirmation that Guernsey has consulted with HMRC and has approval from them that the introduction of this is satisfactory from their point of view,” he said.
“Furthermore, the rules have been written in such a way which could potentially leave them open to abuse as, by removing the need for schemes to check other pension schemes assets if the fund is less than £15,000, there is the risk some individuals will simply keep moving small amounts into Guernsey to then take out as a lump sum and this may also be before age 50.”
The main point of contention relates to the second clause in the registration of a QROPS in which a Guernsey-base scheme will have to confirm to HMRC that, as an unregulated scheme, “at least 70% of a member’s UK tax-relieved funds will be used to provide an income for life”.
Evans believes the triviality rule potentially disqualifies schemes which have registered under this declaration as the only exception to this seems to be for serious ill health and not for triviality.
He added: “I have written to HMRC about this issue to try to obtain clarification and am currently awaiting a response.”
