Reports of the death of third party QROPS are greatly exaggerated and the offshore pension scheme for expats and international workers is far from dead and buried, according to the UK tax man.
iExpats.com has specifically asked HMRC whether policy has changed to ban third party QROPS.
Third party QROPS is the term the offshore pension industry gives to qualifying recognised overseas pension schemes based in one country when the retirement saver lives in another. For instance, many expats have a pension hosted on Guernsey when they live in Spain or one of the Middle East Gulf countries.
The confusion and misinformation in the pensions industry comes from a comment in the latest tax information and impact note (TIIN) concerning QROPS from HMRC.
It says: “This measure will ensure a fairer tax system by making changes to the system of transfers of pension savings from registered pension schemes to QROPS.
“This will ensure that the system continues to be used for its intended purpose of allowing individuals who intend to leave the UK permanently to take their pension savings with them, free of UK tax, to their new country of residence in order to continue saving to provide an income in their retirement.”
Many so-called experts have wrongly suggested this phrase means QROPS investors can only set up a pension in the country where they are resident.
HMRC explains that the current QROPS policy is set out in the TIIN.
“QROPS were not intended to be used as a method of converting existing pension savings into a lump sum or escaping taxation on pension savings,” said an HMRC spokesman.
“An individual can move their UK pension savings to a pension scheme established in another country which is different to the one in which they are resident.”
The answer helps retirement savers looking at transferring their UK pensions to a QROPS.
Malta QROPS are tipped as the main beneficiaries of third party schemes due to strict regulation and tax relationships with other countries as a member of the European Union.