Malta QROPS look at paying out to under 55s

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Some Qualifying Recognised Overseas Pension Schemes (QROPS) are seeking to steal a march on their rivals by stretching pension rules to let retirement savers access their cash before they are 55 years old.

The plan has caused a stir in the QROPS industry as regulators, HM Revenue & Customs (HMRC) and onshore pension providers are embroiled in an ongoing battle against pension liberation firms in the UK.

These firms offer to ‘unlock’ pensions for under 55s, so they can access their cash early.

Some QROPS providers are considering marketing their plans with the same facility if local pension rules in the financial centre where the offshore pension is based allow early access to the fund and the retirement saver has lived outside the UK for at least five years.

The trouble is HMRC also polices the 3,300 or so QROPS in 42 financial centres around the world and providers are testing the water to see how the UK tax authority will react.

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Tinkering with the rules

In the past, HMRC has moved to tackle any attempt by QROPS providers to tinker with pension rules.

However, in the UK, although pension liberation is frowned upon by regulators and the industry, taking funds from a pension before the age of 55 is not illegal providing any tax penalty is paid.

The regulators are also putting a smokescreen around pension liberation by labelling many unlocking firms as fraudsters.

They point out that in some cases; pension liberation firms have stolen pension cash in transit between providers.

Most issues between QROPS providers and HMRC have been rooted in the providers trying to gain leverage in the market with a unique selling point that offered tax advantages over pensions offered in rival financial centres.

Controversial decision

One QROPS centre toying with the idea of allowing retirement savers to draw on their pensions from their 50th birthday is Malta.

The Malta Association of Retirement Scheme Practitioners has talked about the matter and considers expats or international workers who have spent five years or more away from the UK and hold a Malta QROPS should have no problem taking benefits from the age of 50.

The key, suggest some providers in Malta, is HMRC has no legal power to penalise expats who draw on a QROPS before the age of 55 who have served their five years of permanent residence outside the UK.

Even though most providers agree the point, some have decided not to go further as they are concerned onshore providers might refuse transfers to their QROPS.

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