“The [Autumn] statement also suggests a further review will be carried out on the eligibility criteria for foreign schemes, suggesting some schemes may lose the ‘recognised’ status by HMRC,” she said.
Taxable income
Currently, 90% of money taken out of Rops is treated as taxable income compared to 100% in a UK pension, explains Griffin.
She said that the changes will mean income from Rops will be taxed in the same way as a UK pension – at 100% – for anyone returning to the UK.
“This is to prevent Rops being misused by anyone looking for a more favourable tax position,” said Griffin.
Meanwhile, Batty added that the reforms on the taxable income of foreign pensions “makes sense”.
“If a client has been living in Guatemala for the last 20 years, and they have a Rops and they have returned to the UK to retire, money withdrawn from this will be taxed in the same way as a UK resident taking money from a UK pension,” said Batty.
Extending taxing rights
In terms of extending taxing rights, Griffin the sweeping measures announced in the Autumn Statement are likely to affect pension commencement lump-sum on Rops.
“The Autumn Statement is suggesting the member payment provisions will extend from five to 10 years, which is likely to impact the pension commencement lump-sum, limiting it to 25% of the UK tax relieved funds for 10 years instead of five,” she said.
Batty, however, says the HMRC announcement on taxing rights is “unclear” and will wait for the Finance Bill on 5 December to clarify changes around the rule.
