Financial advisors often get flustered when HM Revenue & Customs suspend a Qualifying Recognised Overseas Pension Scheme (QROPS), but often delisting has a simple explanation.
During the past year, dozens of QROPS have opened and closed.
As HM Revenue & Customs steadfastly refuses to comment on the circumstances of any of them, the industry is left to speculate – and often a 1+1=2 answer becomes a lot more complicated.
Most industry people suspect the worse – that the QROPS is suspended because of some sort of underhand tax fiddle, but QROPS rules give several more reasons why a scheme can be suspended.
Appearing on the QROPS list is a big deal for a provider, because British onshore providers cannot transfer pension funds to a fund that is not on the list, effectively turning off the cash flow and supply of new customers.
HMRC publishes the list every two weeks.
QROPS suspensions
Every now and then, some QROPS are missing and the reasons for that can be:
- The provider has closed the scheme temporarily or permanently
- The QROPS no longer meets the qualifying terms and conditions laid down by HMRC
- A QROPS investor may have died, moved their fund or exhausted their fund
- The provider or investor is breaking the rules of the scheme
- HMRC and the provider are looking at some administrative issue regarding the QROPS
HMRC has also been known to make mistakes and exclude schemes and even entire financial jurisdictions by mistake – in that case a revised list is generally released in double-quick time.
Reputation
For some reason, many pension industry insiders have a down on QROPS, knowingly disapproving some providers, advisors and investors because of some unspoken sin.
The fact is, wherever large sums of money are concerned, some people are going to break the rules because they want their fair share.
However, QROPS have been cleared by HMRC of any involvement in the plague of pension liberation that is afflicting onshore schemes.
To a large extent, self- invested pension plans (SiPPS) which are based onshore have a much worse tax and investment reputation than QROPS as some managers of large funds accuse small fund managers of allowing riskier investments than perhaps they should.
Providing QROPS investors choose a trustworthy and experienced advisor and a provider with a good reputation, switching a pension offshore should carry no more risk than leaving the fund onshore.
