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QROPS – HMRC Introduces changes that create havoc in the market place
The period from August 2011 to April 2012 has seen a period of significant but controlled change in the QROPS marketplace.
In August 2011 the New Zealand Government introduced a draft Bill to Parliament, the Financial Markets Conduct Bill, which included proposed changes to the pensions legislation and hence, New Zealand QROPS.
It is expected that the Bill will be passed late 2012. Prior to the passing of the Bill, UK expats who had completed five consecutive tax years of non UK residence and then transferred their pension funds to a New Zealand QROPS were able to request a withdraw of up to 100 percent of their funds in cash.
The Bill, when passed will prevent full encashment of such funds.
In December last year draft regulations were published proposing a number of changes to QROPS legislation affecting schemes in all jurisdictions from 6 April 2012.
In addition to bringing an end to 100 percent withdrawals from New Zealand QROPS forward by several months it also proposed new requirement for all QROPS to ensure that the tax treatment of benefits taken in each jurisdiction were the same for residents and non residents alike.
Whilst this did not create much of a problem for New Zealand schemes or schemes operating under EU jurisdictions such as Malta, it meant that Guernsey and the Isle of Man in particular would need to introduce new pensions legislation to meet the new QROPS requirements if they wanted to remain as QROPS jurisdictions.
And this is what they believed they had achieved until last week…
The publication of a new list of pension schemes registered with HMRC as QROPS has introduced chaos into the marketplace. This has been primarily caused by the “delisting” of over 300 Guernsey based schemes. In addition the Guernsey authorities have announced that HMRC are unhappy with changes in Guernsey law that had been introduced in order to meet new UK requirements for overseas pension schemes to continue to be recognised as QROPS from 6 April 2012.
So, for the moment at least, whilst Guernsey is seeking clarification and assurances from HMRC that they have not been unfairly targeted, Guernsey as a QROPS jurisdiction would seem to be dead in the water.
A similar fate has engulfed one particular type of scheme operated in the Isle of Man.
The chaotic position is not helped by the fact that the HMRC list is not conclusive evidence of an overseas pension scheme’s status as a QROPS. A scheme may still be on the list which does not meet the new legislative requirements and other schemes not on the list meet the requirements. The list is designed to assist not to be definitive.
Over the past few years many people have transferred their UK pension rights in to a QROPS. The most frequent destination has been New Zealand for the purposes of obtaining an immediate lump sum. There are no implications for those who took this course of action after five complete and consecutive years of non UK residency and then received payment.
Others have transferred their pension rights to schemes in Guernsey or Isle of Man and will now find themselves (often not being aware of it) a member of a scheme which is no longer a QROPS. This need not be a problem in that it tends to cause more inconvenience for the scheme itself than the member. The scheme has certain reporting requirements to satisfy to HMRC on deregistration and of course cannot attract new business.
HMRC has stated we should expect further changes in the Finance Bill 2013.
If you are considering a QROPS now is the time to take advice as to what the changes mean for you not least because there are some potentially very interesting consequences and opportunities open to you.
Written by: Stephen Ward BA (Econ), ACII, APMI Managing Director Premier Pension Solutions. Stephen was a member of the UK Government’s Pensions Industry Working Group advising HMRC on the pensions’ legislation changes which introduced Qualifying Recognised Overseas Pension Schemes (QROPS) in the 2006 Finance Act. He is also the author of the definitive textbook on pension taxation, “Tolley’s Pensions Taxation 2011-12”
More Blogs By Stephen Ward BA (Econ), ACII, APMI, APFS, AIFP
- The Economy : What can we look forward to in 2012 ?
- Beyond the tipping point - where next ?
- New Zealand QROPS - good news for all concerned
- Pensions and Politicians
- Changes re New Zealand QROPS - Things are becoming clearer
- QROPS Jurisdictions in Focus : A Round-Up
- QROPS Jurisdiction in Focus : Isle of Man
- QROPS for the UK Expat in Spain
- Could this happen to your UK pension fund?
- Maximising the outcome from your UK Pension fund
- Working for a UK Employer in Spain
- Employee rights & working conditions in Spain
- Transfering your UK National Insurance Contributions to Spain
- Should I Take Out Life Insurance ?
- Glossary of useful Legal, Financial & Procedural Phrases
- Repatriation : Moving Back to the UK
- Claiming Child Benefits
- Common-Law Partnerships In Spain - 'Pareja de Hecho'
- Applying for an EHIC Card as a Spanish Resident
- SIP Cards and Means Tested Prescriptions in Spain
- Claiming UK Benefits in Spain
Blogs From Premier Pension Solutions SL
- QROPS – All Change From April 2012
- QROPS : Stop press - major changes on their way!
- Do you have a UK pension fund? How secure is it?
- Quantitative Easing - good or bad (or both) for your UK Pension Fund?
- Did Your Pension Fund Fall By 15 Percent in August ?
- New Zealand QROPS : Only Available For A Further 12 Months ?
- QROPS Jurisdictions in Focus : New Zealand
- QROPS Jurisdiction in Focus : Guernsey
- QROPS - the realities of giving and receiving advice
- QROPs - Choice of adviser and choice of jurisdiction
- Why not spring clean your pension ?
- New Zealand QROPS - some of our FAQ's
- Access Your UK Pension Fund Before It Falls In Value !