On Wednesday, the UK Treasury announced that income from foreign pensions, the bulk of which consist of recognised overseas pension schemes (Rops), will be treated the same as income from UK pensions.
The reforms will also include changes to HMRC “eligibility criteria” for Rops to qualify as overseas pensions schemes.
In addition, the government also unveiled plans to extend from five to 10 years the taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief and align the tax treatment of funds transferred between registered pension schemes.
The proposals have been met with a mixed response from the financial services industry, some advisers welcoming the move while others believe it will make foreign pensions increasingly complex and unattractive.
Australia Rops removal
In recent years, thousands of Australian and Canadian Rops have been removed from the HMRC pre-approved list for failing to meet the criteria of the pension age test, introduced in April 2015 as part of the pension freedoms.
The conditions of the test requires schemes to ensure savers are not able to access funds before the age of 55 in line with UK law except for in cases of “serious ill health”.
In Canada, Rops primarily ‘registered retirement savings plans’ can be cashed in partly or fully at any time, regardless of age, while Australia allows for access in cases of serious financial hardship.
