Guernsey QROPS 157e schemes delisted
HMRC has recently published new amendment of the Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) Regulations 2006. It essentially delists Guernsey 157e schemes and takes Guernsey off the list as an option for the majority of UK schemes to transfer into. Now the masses will flock to Malta. I spoke to some of the trustees there yesterday and they have been inundated with enquiries for QROPS pension transfers.
Here is the key part to the amendment:
(4A) Where the pension scheme—
(a)is established in Guernsey, and
(b)is an exempt pension contract or an exempt pension trust within the meaning of section 157E of the Income Tax (Guernsey) Law, 1975(2),
the scheme must not be open to non-residents of Guernsey.
Here is the full amendment
HMRC also put out a tax statement about QROPS schemes and how Guernsey 157e has been delisted whilst NZ and EU QROPS are OK. You can access the page here.
Here is the updated QROPS List from 10th May, 2012.
QROPS Guernsey Delisted. QROPS Malta and QROPS NZ Still on the Table
Malta and New Zealand QROPS are still permissable and tick the boxes for HMRC’s QROPS requirements.
Malta is in our opinion the clear choice in terms of robust QROPS legislation.
The key reasons are that:
The Maltese Financial Services Authority (MFSA) consulted with HMRC to ensure that the domestic pension rules were compatible with HMRC requirements. Only then were the first Maltese QROPS approved locally. Each QROPS is approved individually by the MFSA.
A Maltese QROPS qualifies on the basis that its domestic pension taxation is compatible with HMRC (as above) and that it is in the EU. As Malta is based in the EU, there are no additional subjective requirements that are required for the schemes to remain a QROPS I.e. there is no reliance on the transfer fund to provide a 70% income for life (which is the case in Guernsey / Isle of Man); and there is no reliance on the local regulator or nature of double tax treaty’s (as in the case of New Zealand, Australia, Singapore, Hong Kong
HMRC cannot legislate currently or retrospectively against a regulated pension in an EU member state.
The MFSA approve each QROPS individually, the due diligence and capital adequacy requirements ensure that only the most diligent providers can operate a Maltese QROPS.
The MFSA ensure continuing compliance through stringent audit requirements, annual reporting and publication of financial statements.
With a wide network of double tax treaties, a Maltese QROPS does not have to rely on statutory instruments to ensure tax efficient withdrawals. A double tax treaty which covers pensions exists between Malta and Australia.
There have been a number of QROPS that have been removed from the HMRC list. A QROPS in Singapore was removed because it was not registered correctly with the local regulator. A Hong Kong QROPS was removed because it was not set up in line with local Hong Kong pension rules and Guernsey have had to work through some issues with HMRC based upon different providers interpretations of the 70% income for life rule. None of these issues could occur in Malta.
EU qualification criteria for QROPS:
There are a 3 different ways in which an overseas pension scheme can qualify to be a QROPS:
1) An EU/EEA overseas pension scheme qualifies in its own right as a QROPS, as long as it is open to local residents and operates an appropriate system of personal taxation (the latter two points being confirmed at outset with HMRC).
An EU pension cannot be treated unfairly by other EU member states. This means that HMRC cannot legislate either on a current or retrospective basis against the pension rules and regulations existing in other member states.
Pension schemes outside of the EU/EEA need to satisfy a different set of conditions. This places more emphasis on the structuring of trust deeds, double tax agreements, regulatory bodies and codes of conduct. This creates more risk for members and as has been evidenced by removal from the list as highlighted previously.
2) The country where the pension scheme is established has a pension’s regulator, which regulates the pension;
and has a tax treaty with the UK which has provisions in relation to the exchange of information and non-discrimination.
Countries with QROPS schemes using this system include Australia, New Zealand, Singapore and Hong Kong.
3) Where option 2 cannot be satisfied the pension scheme must:
ensure that at least 70% of the sum transferred must be used to provide an income for life;
and benefits cannot be taken before the age of 55.
With Malta, as well as the safety of the pension framework there is also additional flexibility as withdrawal limits can be increased when other sources of income can be identified.
In addition there is no tax deducted on any withdrawals for a non-Maltese resident. Growth within the Malta QROPS will be tax free. To ensure this the assets need to be held by an Offshore Custodian.
For more advice, please send your own circumstances to firstname.lastname@example.orgHMRC puts in the boot for Guernsey QROPS 157e scheme by Richard Malpass