Qualifying Recognised Overseas Pension Schemes (QROPS) are always popping on and off the list published by HM Revenue and Customs.
Some disappear into the abyss forever, while others are merely ‘resting’ while tax officers clear up ambiguities in the paperwork.
Singapore, Cyprus and Slovakia have all disappeared from the list and have yet to resurface, while the tax status of some financial centres, like Guernsey, Hong Kong and New Zealand has changed, leaving the jurisdictions intact but hundreds of schemes unable to accept transfers in from the UK.
But what options for retirement savers when a QROPS is delisted?
The first job of a QROPS administrator is to send details of the fund to HMRC as of the delisting date.
Investor options
HMRC wants to know how much tax-relieved money is in the QROPS, who the money belongs to and the date the scheme ceased as a QROPS.
Any retirement saver then has two options:
- Stay with the scheme, even though it is no longer a QROPS and loses any associated tax benefits
- Go to another QROPS provider
HMRC confirm that as long as the pension scheme was a bona fide QROPS when delisted, it is likely to remain a pension under the rules of the financial jurisdiction where the provider operates. If this is the case, no tax penalties are levied.
But staying can work out rather expensive if the QROPS is permanently delisted and is deemed not to have been a QROPS when pension funds were transferred in from the UK.
Stay or go?
Until the Singapore QROPS case in the High Court in July 2013, HMRC charged retirement savers a penalty of between 55% and 75% of the fund originally transferred out of the UK.
This was because, said HMRC, taking the cash out of the UK fund and switching into a scheme that was not a QROPS at the time broke pension rules.
However, HMRC lost that case and until tax assessments are sent out to retirement savers with pensions in another delisted QROPS jurisdiction, it’s anyone’s guess whether that policy still stands.
Plan B – going – can also work out expensive with exit charges and set-up fees for the new QROPS.
Delisting is also complicated by a provision that allows a QROPS to take in funds without advertising on the official HMRC QROPS list published every two weeks or so.
These schemes can accept transfers in, but HMRC will not let on that they exist unless the pension administrator has given written authorisation to divulge the existence of the QROPS.
