Within the guidance, which it should be noted may still be subject to change, HMRC has confirmed that the rule, currently referred to as “Primary Condition 4” will be put into place. This means plans announced by Guernsey to launch a new form of pension which is compliant with the new condition will very likely need to go ahead.
This will be of no surprise to the QROPS industry in Guernsey which has been preparing to make changes since the draft legislation was published in December last year.
Perhaps the most significant and widely relevant clarification covered by the guidance is to confirm that the revised reporting requirements will not be imposed on schemes established prior to 5 April 2012. The new requirements include the imposition of a ten year reporting rule for QROPS established outside of the European Union.
There had also been some fears that HMRC would remove the ability for QROPS to pay a tax free cash lump sum. However, the guidance notes suggest this will in fact continue to be possible, as long as at least 70% of the client’s pension is retained.
This will mean that the Isle of Man, where many QROPS now run under its 50c legislation, will be able to continue to operate as before. There will still need to be some amendments to their pension laws to satisfy “Condition 4” however, although representatives from the IoM have yet to confirm what these will be.
Furthermore, New Zealand has now been specifically named as the one country with a double taxation agreement with the UK in which a QROPS cannot be established. This is unless the scheme qualifies under the KiwiSaver scheme rules – a highly regulated pension arrangement.
Neil Chadwick, technical manager at IoM-based life company Royal London 360, said: “It is a positive in that the guidance seems to be as clear as it possibly can be which should make it quite easy for the Isle of Man and Guernsey to develop pension legislation which is going to be in accordance with the new rules.”
