Challenges in the Establishment of QROPS
Up until 2006, Her Majesty’s Revenue and Customs (HMRC) spelled bad news for all individuals who worked and contributed to retirement pension schemes in the UK, but wanted to retire abroad.
This was until the QROPS structure enabled hard-working people to retire elsewhere and take their pensions with them.
For several years after its inception, there was much confusion about QROPS, both for investors and their financial advisers, but over the last eight years, new regulations have been implemented that have helped to make matters clearer.
Originally, the structure was set up with the intention of allowing people to move their pension funds with them when they retired across the EU, but it soon became clear to savvy investors that certain jurisdictions offered more attractive benefits than their destination countries, and so people were moving their pensions to these new, third countries for various benefits. As the structure was only newly established, there was much uncertainty as to what was and was not allowed, and for some, this uncertainty ended up with the possibility of harsh tax implications.
In 2008, ROSIIP, a QROPS scheme in Singapore, was delisted by HMRC, which ordered those investors within the scheme to pay a hefty 55% tax charge. This, however, has since been resolved (in 2013), with HMRC withdrawing from the case. Fortunately, most of the challenges have been resolved with QROPS and it now offers an extremely attractive means for investors to move and access their UK pension schemes in retirement.
There is some additional legislature, though, that has been introduced that affects QROPS jurisdictions. For example, newly set-up jurisdictions need to provide an annual report to HMRC for the first decade that they are active, and only thereafter can they independently comply with local regulations and rules.
All of these changes have had numerous effects on the various jurisdictions and some, like Guernsey, which was possibly the most popular QROPS destination initially, are now unable to accept new transfers due to legislative changes.
Currently, Gibraltar and Malta are two extremely popular jurisdictions as they offer numerous benefits to investors moving their pension funds there.
In conclusion, perhaps the most valuable lesson here is that it is best to follow the advice of an expert, independent financial adviser when it comes to moving your pension scheme to a QROPS. With legislature and processes more firmly established now, utilising the services of an IFA is the best way to ensure that you retain access to your hard-earned pension funds.