In support of new government QROPS rule changes
The government’s plans to bring the tax treatment of overseas pensions more in line with Britain’s domestic pension tax regime have my support.
In Wednesday’s Autumn Statement, it was revealed that the tax regulations regarding Qualifying Recognised Overseas Pension Schemes’ (QROPS) will become more aligned with those of UK pension schemes.
These latest plans suggest that QROPS will, as such, be taxed in the same manner as a UK pension for anyone who decides to return to Britain in the future. As it stands, 90 per cent of income from a QROPS is subject to income tax, whereas in a UK pension scheme it is 100 per cent.
Furthermore, payment provisions for members will be prolonged from five to 10 years, and eligibility conditions for QROPS listings will be more stringent.
I welcome these plans as they will help to ensure that QROPS aren’t mis-sold or indeed misused.
QROPS are structured to provide an income throughout retirement for people who live outside the UK on a permanent basis, or those who are planning to do so. In addition, they offer the numerous financial benefits of being in possession of an HMRC-recognised scheme, based in a jurisdiction outside the UK.
The new rules announced on Wednesday will also provide more protection for clients, which, in turn, makes QROPS an even more appealing option.
Indeed, the plans emphasise the fact that QROPS maintain the same or equivalent standards as UK pensions; they are fully immersed in the retirement planning ‘Establishment’; and the market is clearly well-governed due to the allocation of increasing government resources to the market.
Moreover, I am also firmly in favour of the eligibility criteria becoming stricter. This will stop jurisdictions who aren’t meeting HMRC’s rigorous requirements from breaking or bending any rules; whilst fully-compliant jurisdictions such as Malta, the Isle of Man and Gibraltar, will benefit.
As such, we are likely to now see a significant hike in the number of QROPS enquiries following the Autumn Statement, before the new plans come into effect.