Retirement

Hundreds Of QROPS Face Flexible Access Rule Change

Hundreds of Qualifying Recognised Overseas Pension Schemes (QROPS) could face suspension with the introduction of flexible access rules in the UK.

The rules which came in on April 6, 2015, only allow a pension to be classed as a QROPS if the retirement savers can access their benefits in the same way as British pension holders.

That means any scheme allowing someone under 55 to draw cash from their QROPS now falls outside the rules for the scheme.

This is expected to affect hundreds of QROPS in Australia and New Zealand, which are favourite expat retirement destinations.

Both have superannuation and Kiwisaver schemes that have different pay out rules to British pensions.

Australia QROPS under threat

Australia is the largest financial jurisdiction hosting QROPS, with 1,654 schemes on the last HM Revenue & Customs (HMRC) QROPS List published on May 1. 2015. This accounts for around 40% of the 3,723 QROPS pensions worldwide.

However, 15 QROPS were missing from the list compared with two weeks earlier. Neither providers nor HMRC have commented on why the schemes are missing.

New Zealand has 57 QROPS currently listed, which is the same as the number on the previous list. The country is the ninth largest provider of QROPS worldwide.

HM Revenue & Customs (HMRC) is believed to have written to all QROPS providers reminding them of the rule changes and urging them to review their status as QROPS pensions.

Any transfer in to a QROPS after April 6, 2015 which did not meet the scheme rules on that date will face unauthorised withdrawal penalties from HMRC. These penalties start at 55% of the value of the transferred fund.

Transfer risk

HMRC has declined to comment on the QROPS rule change.

The QROPS review affects any financial centre which does not have pension rules that directly align with those of the UK.

Anyone with a QROPS transfer in progress or contemplating switching pension funds offshore should check that the receiving scheme is fully compliant under QROPS rules to avoid the risk of a hefty fine.

QROPS providers must self-certify that their schemes match all the rules – HMRC does not approve or verify this, leaving consumers and their advisers in the position of having to carry out complicated and expensive due diligence prior to transferring any funds.

Transfers from before April 6, 2015 are believed to be unaffected by the HMRC rule change.

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