The Qualifying Recognised Overseas Pension Scheme (QROPS) industry was thrown into confusion by HM Revenue & Customs (HMRC) suspending the regularly published list of schemes accepting transfers from UK pensions.
Effectively, failing to publish the list on June 15 shut the international QROPS industry as UK pension firms cannot switch funds to a QROPS unless the scheme is listed by HMRC.
HMRC claims the measure was necessary as investigations had revealed numerous schemes self-certifying as QROPS compliant failed to meet the new pension age test that was imposed on April 6, 2015.
The test means any QROPS paying benefits to a retirement saver aged less than 55 years old other than if they are suffering from serious ill-health fails compliance requirements.
Guidance from HMRC explains any pension failing the pension age test is not a QROPS, even if the scheme was listed on the HMRC QROPS List before April 6, 2015.
Tax penalties
“If the scheme is not a QROPS, any transfer in will be subject to unauthorised withdrawal rules and will be taxed at a rate of at least 55%,” said an HMRC spokesman.
“We cannot and do not discuss individual schemes, but we expect a number to be missing from the list when publication resumes.
“Anyone considering transferring money from a UK pension to a QROPS should confirm with the scheme manager that it meets all the requirements laid down in pension legislation in the UK, specifically the pension age test.”
The issue came to light after April 6, 2015, when QROPS schemes in Australia realised that they were set up under local pension rules that allows payments to under 55s under certain circumstances.
These schemes were not set up specifically as QROPS but certified that they met the rules and then sought an indemnity from HMRC for expats who had switched cash from their UK pensions.
Due diligence
The indemnity requested HMRC did not charge tax penalties on the transfers.
The HMRC action does not affect pension transfers that took place before April 6, 2015 as the age test was not in place prior to that date.
HMRC has announced that the next QROPS List is expected on or around July 1, 2015.
Providing the retirement saver has carried out due diligence regarding the status of any QROPS listed, transfers should resume as normal.
According to the last QROPS List published on June 1, 2015, Australia held 44% of the global market by number of QROPS, with 1,653 schemes listed.
