Isle of Man Qualifying Recognised Overseas Pension Schemes (QROPS) are set to offer British expats pension freedoms in line with onshore schemes later this year.
The Tynwald will roll out the new rules for all Manx pensions – including QROPS – said Treasury member Bill Shimmins in a progress update..
Shimmins explained a working party of pension providers has joined a government team to draft the proposed rules and the first draft of new legislation will soon be ready.
If the recommendations are voted through, the Isle of Man will become the second QROPS centre to offer pension freedoms along the lines of those enjoyed by British retirement savers.
Hundreds of thousands of UK pensions have paid out more than £9 billion under the freedoms introduced in April 2015.
70% QROPS rule scrapped
The rules allow savers over 55 years old to take cash from their pensions as they wish.
Malta QROPS also allow providers to offer pension freedom benefits.
The Isle of Man, in common with all QROPS centres outside the European Union, cannot offer the new service before April 6, 2017, due to the ‘70% rule’.
This rule demands any QROPS outside the EU should ring fence 70% of any tax-relieved contributions to provide a pension for the retirement saver.
Although the Isle of Man is a British Crown dependency, this status does not make the island part of the EU.
The British government is scrapping the 70% rule from April, allowing all QROPS to offer pension freedoms.
Pension transfer worries
The Isle of Man is home to the second largest number of QROPS pensions behind Australia.
The latest QROPS List published by HM Revenue and Customs (HMRC) shows Australia has 387 QROPS – 30% of the global total of 1,275 pensions.
The Isle of Man has 248 – 19.5% of the total.
Both financial centres have headed the list for giving a home to the largest number of QROPS pensions for British expats since they were introduced in April 2006.
Former IoM Treasury Minister Eddie Teare set pension freedom in motion in 2015, but in doing so argued that the new rules would have a profound impact on the island’s financial services industry and expressed concerns that the measure could halt fund transfers by British retirement savers.