1. Brief Summary
·
The use of
Guernsey as a QROPS jurisdiction is no longer possible
·
This does not
affect existing clients who have completed their transfers from the UK into a
Guernsey QROPS
·
There are
other QROPS available elsewhere for those who have not yet taken action
2. Background
Following my post on 22nd March 2012, some further notifications by HMRC have clarified a few issues
relating to QROPS.
3. Re-Cap
of Budget 2012
There were a few changes imposed by HMRC in the
March 2012 Budget, although very little affects our clients. The only notable
difference is noted below.
From 6th April 2012, a QROPS trustee
must inform HMRC of any payments made to a member for 10 years after a transfer
was made into the QROPS. Typically, the only payments made to you (as the
member) will be your “Pension Commencement Lump Sum”, which is 25-30% of the
fund value, or any pension income you take. Of course, neither can take place
until age 55.
Some of the countries that provide QROPS services
made changes to their own tax laws to ensure ongoing compliance with all new
rules.
The new changes would then result in a new
published list of QROPS, to be made public on HMRC’s website on 12th
April 2012.
4. QROPS
Listings
Much to the whole industry’s surprise, a few
jurisdictions that were previously very active in offering QROPS services, were
not on the list published on 12th April 2012 (http://www.hmrc.gov.uk/pensionschemes/qrops.pdf ).
Of particular note was the exclusion of any schemes
based in Guernsey.
There are a few reasons why this may have happened,
most notably the lack of Double Taxation Agreements (‘DTA’) that exist in
Guernsey. The likely fear HMRC have here is the resulting possibility that
people can receive their pension free from any income tax.
Curiously, even where a DTA exists, clients could
receive their pension without having to pay income tax. For example – if
someone has a Malta-based QROPS and lives in Singapore; Malta and Singapore
have a DTA, and therefore Malta will pay the pension without taking tax. The
client then accounts for income tax in Singapore, which for foreign income,
happens to be zero!
5. What
the exclusion of Guernsey means for existing Guernsey QROPS clients
HMRC have specifically stated that any clients with
a Guernsey based QROPS already in place will not be affected by the removal of
their scheme from their QROPS list. Therefore, there is no change for existing
clients, as long as all transfers are complete. However, no further UK schemes
can be transferred into their Guernsey QROPS.
6. Options
for new QROPS clients
I have already researched the market for viable
QROPS alternatives, and to date, Malta and Hong Kong appear to be the most
favourable.
As a result, if someone has not yet used a QROPS to
house their UK pension monies, they can still do so using one of these
jurisdictions. Most commonly, the
reasons people consider this transfer are as listed below: -
1.
Removes the
requirement to buy an annuity at retirement age (typically annuities although
guaranteed, are considered poor value for money and will not return capital on
death)
2.
For Final
Salary schemes, where the income is guaranteed but on death there is
potentially no-one who will receive anything, the ability to pass their fund to
their family (also note point 4)
3.
Most UK
schemes have a very poor choice of investment funds therefore potentially
stifling growth, whereas by moving, the investments options available widen
enormously and can include other currencies
4.
A potential
removal of the 55% tax charge that can apply to UK pensions in the event of
death whilst in receipt of pension
Please feel free to share with your colleagues and friends.
