The future of Qualifying Recognised Overseas Pension Schemes (QROPS) and how they will interact with the new flexi-access pension rules remains puzzling after Chancellor George Osborne’s Autumn Statement 2014.
The statement is a mini-Budget that gives the Chancellor an opportunity to give a report on how the economy is progressing and to give a heads up to taxpayers and product providers about likely changes in the coming main Budget 2015.
The Treasury and HM Revenue & Customs (HMRC) have promised for some months that the flexi-access pension rules coming in for onshore pensions from April 6, 2015 will also include QROPS.
But, the promise has come with no details of how the procedure is likely to work for expats or international workers with QROPS pensions, just a platitude that more information is on the way in time for the reforms.
The autumn statement was the ideal time and place for Osborne to flesh out the proposals in time for prospective QROPS pension transfers to go ahead and for providers to bring their systems up to date.
Missed opportunity
Despite this, the Chancellor was silent on QROPS.
This leaves retirement savers and the industry in limbo. They know the rules are changing, but just not quite how.
Some industry experts have floated the possibility that the flexi-access rules will only apply to pensions in the European Union and European Economic Area – effectively the EU plus Norway, Iceland and Liechtenstein.
This leaves Switzerland, one of the top global QROPS providers by number of pensions outside of the potential flexi-access zone.
Switzerland offers 139 QROPS pensions and has a 4% market share, making the country the fourth largest global provider.
Tax-free lump sum
Insiders suggest the delay in the announcement confirming the details of flexi-access drawdown for QROPS lie with some countries offering up to 30% tax-free lump sum pay outs, while UK pensions offer a maximum 25%.
These include some of the leading QROPS financial jurisdictions, such as the Isle of Man, Malta, Gibraltar and Jersey’s new revamped offering that comes into force from January 1, 2015.
HMRC and the Treasury are declining to comment on the matter, other than to confirm the earlier statement that new rules are on the way and will be available before April 5, 2015.
Brendan Harper, technical manager at Friends Provident International: “The new pensions bill going through Parliament readies legislation for flexi-access pensions but that seems as far as it goes for the time being.”
