While some jurisdictions require at least 70% of a Qualifying Recognised Overseas Pension Scheme’s UK tax relieved funds to provide an income for life, some schemes which qualify due to being established in an EU jurisdiction, such as Malta, do not rely on this requirement.
Old Mutual Wealth says this means clients who hold QROPS in such jurisdictions will be able to benefit from the new pension flexibilities, providing local rules are changed to allow this.
This comes after HMRC released a statutory instrument earlier this month announcing that the “70% rule” on QROPS will remain “temporarily” following the pension reforms on 6 April, despite proposing the removal of the rule in December last year to bring the schemes in line with fully-flexible UK pensions.
Old Mutual Wealth said the decision on which QROPS to choose will now need to take into account how the client intends to access their pension fund and whether the full pension flexibilities are required.
It added that on a longer term basis, it is anticipated that all QROPS will be able to benefit from full flexibility, as legislation to replace the 70% rule will be forthcoming, although the Revenue is yet to clarify when the changes will occur.
Jon Greer, pensions expert at Old Mutual Wealth, said: “The new requirements relating to QROPS may have created some inconsistencies in the market, but good financial planning opportunities using QROPS still exist.
“Regulations will vary according to the jurisdiction of the QROPS and some jurisdictions will allow the client full flexible access to their money. Advisers and clients should check with their QROPS provider if they are in doubt as to how the new regulations impact them.”
Attractive
Gerry Kelly, group finance director at QROPS provider Sovereign, said Malta will be able to offer flexibility, but by the time the necessary changes are made, it could be the end of 2015 or early 2016.
“I see this as making Malta a more attractive jurisdiction (provided the pension member resides in a suitable double tax treaty country) until the position on the 70% rule is clarified,” he said.
“Saying that, many pension transfers will be unaffected as the pension members will not be interested in the flexibility so Gibraltar will still be an attractive QROPS jurisdiction.”
Similarly, John Batty, director at Momentum Pensions, said: “HMRC have decided to keep the 70% rule on a temporary basis so that they can fine tune the legislation.
“The 70% rule has always only applied to schemes that are not in EU member states, which means that Malta’s recent change of legislation will allow schemes to pay benefits in a similar way to the UK. Schemes will need to apply to the MFSA to be registered under this new Act, before they can use the flexibility and we expect this to happen in the second half of the year.”
Temporary
Roger Berry, managing director at Guernsey-based Concept Group, said: “As the general policy was to extend pension flexibility to overseas schemes its odd that the effect currently is to create an unlevel playing ground.
“Malta as an ongoing QROPS jurisdiction and Guernsey with its delisted QROPS book have the ability to offer flexibility in the near short term. Gibraltar will need to await the “temporary” period HMRC advise will be required to bring about pension flexibility to all relevant overseas schemes in the form they intended.
“It remains to be seen if QROPS providers will soon start offering pension access product and at what price. Given the vagueries of some elements of the tax consiquences of access in overseas schemes, it may be longer than people expect.”
