Qualifying Recognised Overseas Pension Schemes (QROPS) are in for no changes following Budget 2013 following the major ‘next generation’ rule changes after the last budget.
Chancellor George Osborne made no mention of offshore pensions and the only reference to QROPS in the reams of data published by HM Treasury and HM Revenue & Customs in support of the speech comes in the Budget 2013 notes.
The document confirms that QROPS must self-certify with HMRC every five years that they still meet QROPS rules.
Former QROPS must report any payments out of transfers received while the schemes were QROPS.
The notes signal extra reasons for excluding a pension scheme as a QROPS will be included in the 2013 Finance Bill.
Meanwhile, retirement savers have some decisions to make as thresholds and other pension rules change – and some may encourage them to consider switching their funds offshore to a QROPS.
- Pensions will pay a higher income as government actuarial department limits for basing payment calculations are hiked from 100% to 120% from March 25, 2013.
- The downgraded £40,000 annual allowance will come in from April 6, 2014 – but many retirement savers need to act now as the limit test is the pension input period rather than tax year. If the input period ends after April 5, 2014, then the pension scheme is already subject to the £40,000 limit.
- Savers can boost their pension funds before a QROPS transfer before the lifetime allowance is cut again for the second year running. Accrued pension benefits will be capped at £1.25 million and the tax-free lump sum at £312,500 from April 6, 2014.
Confirmation of the £72,000 cap on the social care part of long term care costs is welcome as the move introduces some certainty for those approaching retirement who own their homes.
Decades of talk
In his Budget speech, Chancellor George Osborne told MPs that he believed the elderly should not have to give up their homes to pay social care bills.
He explained the cap on fees would help people plan their finances in their later years.
The cap is more than double the £35,000 recommended by Dilnot in his report two years ago, and the figure of £55,000 first mooted by the government amid concerns that the cap would cost almost £2 billion to introduce.
However, the cap will start in April 2016. At the same time the financial test for residential care will increase from £23,000 to £118,000.