The clock may be ticking for local government and civil service employees who might want to switch their pensions overseas to a Qualifying Recognised Overseas Pension Schemes (QROPS).
Chancellor George Osborne announced in Budget 2014 that a ban was probably on the way against transferring public sector pensions into other schemes, including QROPS, from April 2015.
The ban would depend on the results of consultation on the proposal – which ended on June 12, 2014.
A final decision could be announced from July 22, 2014, which could result on a freeze on public pension transfers until legislation cementing the decision is passed in time for the new financial year.
The Chancellor seems to want to stop civil servants and local government workers from cashing in their pensions under the new easy access rules he announced for defined contribution pension savers in the Budget.
Treasury pension fears
The reason is he fears a sudden outflow of public pension cash that is underwritten by the Treasury and the detrimental effect this move could have on the country’s economic recovery if he suddenly had to find billions of pounds in extra cash to cover shifting retirement savings.
QROPS are not the only choice for anyone wanting to move to a personal instead of a public scheme.
However, they represent a tax-efficient option for anyone deciding to sell-up at home and move abroad permanently – or for international workers who have built up a UK pension entitlement.
Switching a defined benefit pension to a QROPS comes with a downside as well as tax and investment benefits.
A defined benefit pension typically comes with add-ons and a guaranteed pension payment that are hard to match pound-for-pound with a QROPS.
However, as the government continues to tinker with pension rules and contemplates restrictions on public sector pension drawdown, some civil servants and local government worker planning to retire overseas might decide that a QROPS is a better pension option.
Finding the right QROPS
Finding the right QROPS fit should not present too much of a problem.
The HM Revenue & Customs (HMRC) QROPS list comprises more than 3,400 pension schemes across 42 financial jurisdictions.
QROPS are controlled by local pension regulators rather than the vagaries of British government policies and finances.
With so much at stake, two important factors public sector workers should consider in what could be a short window of opportunity are the reputation and regulation of the financial centre where a QROPS provider is based and the professional standing of their financial adviser.
The Isle of Man, Malta and Gibraltar are all considered reliable financial centres with robust regulation – and all allow retirement savers to base their pensions with them while living in another place.
