Qualifying Recognised Overseas Pension Scheme (QROPS) savers need to make sure their providers renotify their scheme status or they could face steep tax penalties.
The renotification process was due to start on April 1, 2015, but has been put back a year by HM Revenue & Customs (HMRC).
Providers and HMRC felt more time was needed for providers to collect and file the information required by HMRC.
Renotification is a rolling procedure which demands QROPS administrators confirm their offshore pensions still meet all registered offshore pensions scheme rules once every five years.
One of the issues that have led to the renotification delay is the introduction of flexible access to QROPS pensions from April 6, 2015.
Flexible access
So far, only three jurisdictions – Guernsey, Malta and Gibraltar – have announced they intend to offer QROPS savers the option.
However, so QROPS can offer flexible access, HMRC has removed the key rule that 70% of any fund held in one of the pensions must be ring-fenced to provide the pension member with a retirement income.
Relaxing this rule could change the status of many QROPS pensions, so HMRC has given administrators more time to adjust their schemes, according to an item in HMRC’s latest pension newsletter.
If a QROPS fails to renotify, then HMRC can suspend or delist the scheme.
If that happens, under QROPS rules, any transfers of UK tax-relieved contributions in or out of the pension become unauthorised withdrawals.
For pension savers that means they pay a hefty minimum 55% tax charge on the value of their pension funds.
Administrative burden
The issue for QROPS savers is their scheme administrators must renotify the scheme’s status to HMRC, and if they fail to do so or the status of the scheme changes, the saver is liable for the tax penalty.
Renotification dates depend on when HMRC issued a QROPS number to the scheme.
With 3,673 QROPS across 45 financial jurisdictions, integrating flexible access and renotification are major administrative tasks for HMRC and pension providers.
“Moving renotification back a year eases some of the administrative burden on HMRC and QROPS providers,” said an HMRC spokesman.
“After April, it will become clearer what information providers need to supply and when.”
Full details of how the renotification scheme will work and details of penalty charges for unauthorised transfers are on the HMRC web site
