Earlier this week, Jason Porter, director of European IFA firm Blevins Franks, said Malta will be the “main winner” when this proviso is abandoned by HMRC, details of which, will be released in the UK’s Finance Bill on 5 December.
He explained that since their launched in 2006, the growing popularity of Rops has seen them expand into “normal taxing jurisdictions and tax havens alike”, leading to successive UK governments regularly intervening to clampdown on what they described as ‘pension-busting’ or other tax avoidance.
Domestic regulations apply
Rex Cowley, co-founder of Guernsey-headquartered Overseas Trust & Pension, welcomed the removal of the 70% caveat, adding that it will “level the playing field” between foreign pensions and UK pensions.
However, he pointed out that flexible access to such pensions could not be adopted until regulation in the jurisdictions where the Rops are based are also changed.
“It’s good news in that it allows foreign schemes to align themselves with the UK, but practically the legislation in those foreign schemes would also need to evolve to allow this to happen which isn’t a bad thing as it levels the playing field after the UK introduced the pension freedoms in April 2015,” he told IA.
He added that although the UK may say ‘you can take any amount of pension you want’, in reality Rops providers may reply ‘our territory only allows us to pay out 30%’.
“In which case abolishing the 70% ‘income for life’ rule doesn’t really make any difference,” said Cowley.
Boost for advisers
However, Davies questions the need for a Rops as a pension product if it does not allow flexible access similar to British pensions, adding that the HMRC changes may be a boost for UK-based financial advisers like himself.
“If you are not prohibited until the age of 55 from accessing your pension then you can’t have a Rops. And if those schemes offering Rops don’t have the equivalent of flexi-access then one has to question the advantage of a Rops – unless there are tax advantages.
“We could see a move of benefits back to UK with UK advisers managing such assets,” he concludes.
