Commenting on HM Revenue & Customs recent announcement that it was “considering the implications” of applying the upcoming UK 100% pension withdrawal allowance to QROPS, Gary Boal, managing director at Boal & Co, called such a change a “tax bonanza for the Exchequer”.
“There are still horrendous tax consequences with 100% withdrawal flexibility, and those are the same for QROPS members as they would be for members of UK schemes,” he said. “It is arguably more of an issue for QROPS, because the pensions are usually larger.”
“100% cash-out flexibility is a good thing for someone with a typical £20,000 defined contribution pot, but it is madness for someone with an amount as large as £300k, so for the QROPS market I feel this is much ado about nothing.”
Boal’s comments relate to HMRC’s Freedom and Choice in Pensions consultation at the end of last month, which discussed how enabling the complete withdrawal of a UK pension pot and removing the need for an annuity will affect the industry when introduced next April.
A HMRC spokesman said at the time: “The government is considering these implications further to ensure that the rules relating to QROPS are appropriate when the new system comes into force.”
“Logical”
Paul Davies, director at Global QROPS, said that, while nothing had yet been confirmed, the way in which the pension reforms from this year’s Budget have been legislated make it “logical” for QROPS to be approached in the same way as UK pensions.
“The only thing that would need to change would be the requirement of QROPS to provide a 70% income for life,” he said.
However, he added that, even if complete withdrawal is permitted in QROPS, there would still be issues regarding the local legislation in areas where the products are commonly domiciled: “The legislation in popular areas such as Malta and Gibraltar could maintain limits on the amount of money that can be withdrawn, and this would ultimately overrule HMRC.”
He said the introduction of withdrawal flexibility could potentially lead to a “resurgence” of QROPS jurisdictions such as New Zealand and Australia, whose local legislation permits the complete withdrawal of funds.
Change to local legislation
Similarly, chief executive of Brooklands Pensions, Paul Evans, said that any changes made by HMRC would require “certain jurisdictions to make significant changes to their local legislation”.
He added that New Zealand would be affected favourably if the UK Government introduced the withdrawal changes: “Fortunately for New Zealand schemes, local rules are in place which already offer 100% remission to resident members, so of the major QROPS jurisdictions the are arguably best placed in this scenario.”
Yesterday, deVere’s chief executive Nigel Green said the Government’s consultation on QROPS demonstrated a “maturing” UK pensions market.
