QROPS in Gibraltar have been given the green light by HMRC.
There was an article in the Gibraltar Chronicle today confirming that the Inland Revenue have given the stamp of approval for the Gibraltar QROPS to proceed. This move follows changes made in June to the Gibraltar law governing local pension schemes that are eligible to receive transfers from UK pension schemes and to lengthy high-level discussions between members of the Gibraltar Association of Pension Fund Administrators (GAPFA), the Rock’s Government and HMRC.
As a result, a senior HMRC official confirmed in a letter dated 31st August 2012, “there is no HMRC objection to Gibraltar QROPS commencing or resuming the acceptance of transfers from UK registered pension schemes”.
Steven Knight, GAPFA chairman, in a statement noted: “We have been confident that Gibraltar’s schemes for imported pension schemes are fully compliant with the UK’s intention to ensure that the majority of any fund is used solely for providing an income for life in retirement, and this official HMRC endorsement has made worthwhile our past voluntary suspension of activity in this area”.
Gibraltar previously had a problem with HMRC for having a zero percent income tax on the island. The new tax code allows a 2.5% income tax on both residents and non-residents thus satisfying ‘condition 4’ of QROPS regulations. It is thought that Gibraltar is one of a limited number of jurisdictions to have received formal notification from HMRC that its QROPS meet the UK requirements. This will provide a greater degree of certainty for pension scheme members and their advisors than just reliance on a scheme being included on an HMRC website listing of notified schemes.
Earlier in the year, more than 300 Guernsey QROPS schemes were delisted along with many Isle of Man schemes. Malta, NZ and Gibraltar are now the main QROPS jurisdictions. Malta is the de facto QROPS jurisdiction as it has more than 60 Double Taxation Agreements with countries from all around the world. If you reside in a country which has a DTA with Malta, Malta will pay out your pension gross with no tax deducted. This enables you to avoid the 55% tax upon death whilst drawing benefits and UK income taxes of up to 45%. Gibraltar charges 2.5% income tax, so it is a suitable jurisdiction if you are living in a country which does not have a Double Taxation Agreement with Malta. For example, a British expatriate living in Thailand would be better off moving to Gibraltar.
A New Zealand QROPS is another option which does not have income tax when you draw benefits. The NZ QROPS uses a discretionary fund manager and only has 5 basic fund strategies, so your options are much more limited than in a Gibraltar or Malta QROPS. The Isle of Man are now trying to sign more DTA’s with other countries. At the moment an IOM QROPS is suitable mainly if you live in Bahrain and Qatar, although there are a few other countries which have DTA’s with the Isle of Man.
Send an email to firstname.lastname@example.org for a list of DTA’s and to find out which QROPS would suit the country you reside in.
The Future for QROPS in Gibraltar
To ensure existing and future QROPS meet HMRC needs, Gibraltar Association of Pension Fund Administrators (GAPFA) has been liaising with both Gibraltar Tax Office and Gibraltar’s Pensions Regulator and will also bear in mind continuing HMRC requirements.
Knight, who is also chairman of pensions specialist Castle Trust Group, said: “The Association is close to finalising an approved Code of Practice that will be compulsory for all members and this will help ensure that there are no grey areas.”
Gibraltar requires that pension and acceptable pension commencement lump sum payments are limited to those over 55 years old and that pensions will be taxed at 2.5 per cent. At least 70 per cent of the fund will be applied to support for future pension payments. Programmed withdrawals are allowed. Transfers out of the Gibraltar schemes will only be permitted to jurisdictions with conditions at least as strong as those in Gibraltar.
“Further changes may become necessary – and the Code will be updated regularly – to ensure that members of the public and pensioners can have confidence in Gibraltar-based QROPS being managed to the highest standard possible”, Knight said.
“Non-compliant rogue operators will not be able to use Gibraltar in any way,” he emphasised.
This is great news for the QROPS industry in Gibraltar and makes it an attractive destination for QROPS pension transfers.
Click here for more information on QROPS fees in Gibraltar and to get a pension analysis for a QROPS Gibraltar Gets the Green Lightby Richard Malpass