A common question from expats is about how Brexit will impact on a Qualifying Recognised Overseas Pension Scheme (QROPS).
So far, the British government nor HM Revenue and Customs (HMRC) have made any comment about leaving the EU and QROPS.
Chancellor Phillip Hammond may raise the issue at the forthcoming Autumn Statement on November 23, but to be fair, he probably has a lot more economic issues weighing on his mind.
The future of QROPS pensions for expats looks linked with Brexit.
The pensions were first established in April 2006 to help British expats with easy access to their retirement cash when moving around the European Union.
Pension providers outside Europe jumped on the bandwagon when they realised that expats liked the offshore pensions and that they applied as much to expats anywhere in the world as those in Europe.
The 70/30 QROPS rule
Now 42 financial centres offer QROPS – 21 EU states have 284 pensions, while 21 non-EU states have 992 pensions.
The main difference for EU/non-EU pensions is the 70/30 rule.
This rule dictates that only QROPS within the EU can offer pension freedoms along the same lines as the UK. Those outside the EU have to ring fence 70% of the QROPS fund to provide a pension for the retirement saver, which effectively precludes offering pension freedoms.
The only European state to offer QROPS with pension freedoms is Malta.
When Brexit finally happens, Britain may have to deal with the 70/30 rule to bring EU QROPS in line with non-EU offshore pensions – or vice versa.
Otherwise, Brexit does not really impact QROPS too much.
Any changes are unlikely to be retrospective, so any expat switching their pension from the UK to a QROPS before any Brexit changes come into force should have no worries about the integrity of the scheme.
When the 70/30 rule was introduced, Chancellor George Osborne claimed the measure was ‘temporary’. That was in 2014.
Murmurings coming out of HMRC and The Treasury suggest Whitehall is unhappy with the pension advantages bestowed by QROPS on expats and officials have expressed they are unhappy with rules that let retirement savers keep a QROPS in one financial centre while they live in another.
So far, these are just rumours and no concrete consultations about QROPS have come out.