Hundreds of thousands of UK pension savers have opted to take money early from their retirement savings under flexible access rules introduced in April – and now this benefit is available to Qualifying Recognised Overseas Pension Schemes (QROPS).
So far, only Malta QROPS can offer flexible access – and although pension laws on the Mediterranean island allow any provider to pay out pensions early, so far only one firm has taken advantage of the opportunity.
Flexible access allows any pension saver aged 55 or over to access some or all of their retirement savings before they reach their official retirement age.
The rules apply to registered pensions, and QROPS are registered pensions under British pension law – but not all providers can offer the opportunity.
Flexible access limitations
Chancellor George Osborne wanted to roll out flexible access to all QROPS when he first announced the measure.
But shortly before flexible access started on April 6, 2015, he changed his mind.
The rules say only QROPS based in the European Economic Area (EEA) can implement flexible access. To do so, local regulators have to change pension laws to allow the payments.
The financial centres offering QROPS in the EEA are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Spain and Sweden.
Popular QROPS centres such as Gibraltar, Guernsey, Jersey and the Isle of Man are outside the EEA.
Under current rules, QROPS centres outside the EEA must retain 70% of any tax-relieved funds transferred into a QROPS to pay the saver a pension for life.
Malta QROPS benefits
Gibraltar, Guernsey and the Isle of Man all want to offer flexible access, but until HMRC changes the rules, it’s difficult to see how they can work around the rules.
The options for an expat wanting to transfer to a QROPS and take advantage of flexible access are limited.
Just one provider on Malta offers the service out of 945 QROPS on the market worldwide, although more based on the island are expected to follow soon.
Malta QROPS also have other benefits for British expats and international workers with UK pension rights.
Providers allow expats to live anywhere in the world and to take up to a 30% tax-free lump sum, compared to 25% in the UK.