HM Revenue and Customs has revealed the scope of the Qualifying Recognised Overseas Pension Scheme, QROPS, market in an impact assessment released with details of new regulations to tighten up management of the offshore retirement savings plans.
According to HMRC, if transfers from UK-based pensions to QROPS continue at the current rate, any changes in the law will affect 10,000 expats and international workers with British pension rights every year.
The new regulations are formalising notice given by Chancellor George Osborne in Budget 2012 to toughen reporting requirements for QROPS managers.
One of HMRC’s main concerns is what happens to pension cash switched out of the UK when a QROPS scheme closes.
The policy objective, according to the documents released with the draft regulations, is to make sure retirement savers do not gain any unfair tax advantages after sending their money to an offshore QROPS pension.
New QROPS regulations
The rules call for managers of QROPS schemes that no longer accept transfers but still administrate funds to give HMRC regular updates on pension members and their money from the date the proposals come into force – although no date is set yet.
Almost 350 QROPS in administrative limbo are not affected by the new proposals. Although banned from receiving new funds from the UK, but still managing pensions for expats. Just over 300 of these QROPS are based in Guernsey. The rest are in various countries, including Cyprus, Singapore and Slovenia, which are all former QROPS jurisdictions that cannot currently receive transfers in.
Besides clarifying management of QROPS not receiving transfers, the new regulations also review administration for overseas pensions for public service and overseas organisations.
Other guidance covers making electronic notifications for QROPS managers and a revamp of various QROPS forms in line with the new regulations.
Another change covers a proposed penalty system for QROPS managers who fail to notify fund changes within HMRC’s time limits.
Policing offshore funds
However, HMRC would find policing offshore fund managers who break the rules difficult as, by definition, QROPS financial centres are offshore and out of the reach of British courts. The only likely sanction would be removal from the QROPS list if notifications were not made.
All the changes are retrospective to April 6, 2012.
“Legislation will also be introduced to set out in more detail the information that is required of scheme managers of QROPS and former QROPS. Legislation will also enable scheme managers of former QROPS to supply information electronically,” said the HMRC impact assessment.
If you are interested in transfering your UK pension to a QROPS and would like to be put in touch with a qualified financial adviser, please contact us via the contact form here for a referral.