QROPS retirement savers and providers can relax at no major rule changes come from Chancellor George Osborne’s autumn statement 2013 after a major industry shake up 12 months ago.
Last year’s autumn statement announced a raft of new Qualifying Recognised Overseas Pension Scheme (QROPS) rules aimed at curbing alleged tax avoidance in some financial centres.
The result was hundreds of QROPS closing worldwide – with more than 300 shutting for new business in Guernsey alone.
Other major casualties were schemes in the Isle of Man, New Zealand and Cyprus.
As a result of the crackdown, some financial centres reversed decisions to introduce QROPS – notably in Jersey and Qatar Financial Centre.
This year, the Chancellor has only tweaked reporting rules by QROPS administrators.
The new requirement demands QROPS report on schemes every five years and must inform HM Revenue and Customs (HMRC) that the scheme remains a QROPS every five years.
Fairer tax system
The aim is to try to ensure QROPS pay out funds as pensions and cannot distribute investments outside of pension rules in a bid to circumvent paying tax.
“The new measures will ensure a fairer tax system by making changes to the way pension savings are transferred from registered schemes to QROPS,” said an HMRC spokesman.
“The changes will improve compliance with the QROPS regime and will most likely impact those who are seeking to use QROPS in a way that was not originally intended.”
This minor rule change reflects that HMRC likely views last year’s major changes as successful in curbing tax avoidance.
Despite concerns over the future of QROPS, more schemes have opened in financial centres like Malta and Gibraltar.
Tax effective expat pensions
QROPS remain a small financial cog in the retirement saving market, although more than £2 billion of funds have switched offshore from the UK since the schemes were started on April 6, 2006, according to freedom of information act details disclosed by HMRC.
The market is niche – aimed at British expats who have moved permanently overseas and international workers who have accrued UK pension rights.
QROPS offer expats tax effective retirement planning with flexible investment options.
Other attractions include generally higher tax-fee lump sum pay outs of up to 30% rather than 25% allowed in the UK, and opportunities to sidestep currency exchange fluctuations by taking pension benefits in one of a choice of major currencies.
More than 2,500 QROPS are offered across 50 countries by hundreds of providers.