On April 6, many new regulations for QROPS came into effect. These changes were made to make the taxation of foreign pensions more in line with UK pensions. Any QROPS not registered as being compliant with the new rules by April 5 could be delisted by HMRC.
One significant change means that, as long as they qualify under the other requirements, it’s no longer compulsory for schemes to adhere to the “70 per cent” rule. This is a rule that ensures providers ring fence 70 per cent of the pension contributions transferred into the QROPS in order to provide the saver with income for life.
Dropping this rule means pensioners have much more freedom in how much they’re able to withdraw, with anyone over 55 able to withdraw as much as they like from their savings. This decision has long been expected since George Osborne introduced pension freedoms in the UK in April 2015.
As a result of the changes, the Gibraltar government reviewed its pension regulations to make sure Gibraltar didn’t lose its status as QROPS jurisdiction. Many expats were expecting flexible access to be introduced in Gibraltar QROPS as part of the new regulations. However, after talks with HMRC and the Treasury in London, the Rock has decided not to offer such freedom.
In a press release from the Gibraltar government, Albert Isola, Gibraltar’s Minister of Commerce, confirmed that the current arrangements, requiring QROPS members to retain 70 per cent of savings to provide income for life, would be kept. Isola also confirmed the rate of tax on benefits taken from the funds would continue to be levied at 2.5 per cent.
The decision is likely to disappoint the thousands of expats with retirement savings in Gibraltar who were hoping to gain more freedom in how they access their savings.
Of the new regulations, Isola said he was believed they will “ensure that Gibraltar retains the highest standards of pension regulation and maintains its status as a ‘recognised’ jurisdiction for QROPS pension schemes”.
Changing times for QROPS
There has been much uncertainty surrounding QROPS recently. Those wishing to experience the benefits of putting their retirement fund into a QROPS have been faced with complications. A big obstacle came with Chancellor Philip Hammond’s Spring Budget, when, in a controversial move, it was confirmed there would be a 25 per cent tax on all transfers for individuals not in the European Economic Area (EAA). The charge was made effective immediately.
Furthermore, although Gibraltar’s QROPS status is safe, the changes to the eligibility rules that came into effect on April 6 saw many other schemes become delisted. A new list was published on April 18 showing all the current qualifying schemes. Overall, the changes resulted in more than 400 offshore pensions being removed from HMRC’s list of schemes that could accept pension transfers – taking the worldwide total down from 1,342 to 932 – nine financial centres lost their QROPS status.
And it would appear there are more changes on the way. Just days after this mass delisting, HMRC sent out a pensions scheme newsletter for April 2017 in which it confirmed it would again be suspending the list on June 2, with yet another revised list to be released on June 8.
With all the changing rules and seemingly endless revisions of QROPS pensions recently, it can be very easy to become confused over where you and your money stand. With a Blacktower financial adviser to assist you, you can be sure that you’ll get only the best, most up-to-date advice concerning QROPS pensions. Contact us today for more advice.