A QROPS Gibraltar may be a better choice than a QROPS in Malta due to the nature of Double Taxation Agreements (DTA’s) in Malta. Gibraltar is relatively new on the QROPS scene since 300 QROPS schemes were closed in Guernsey. The Gibraltar scheme had been around for a while, but was only vetted when they changed their local income tax from 0% to 2.5% to comply with HMRC’s instance that 0% was not an applicable rate of tax. Since so many Guernsey and Isle of Man Schemes closed, Malta seemed to take most of the QROPS business and seemed to be the new de facto place to park your QROPS as they have 65 Double Taxation Agreements with countries all around the world.
If only it were that simple. Many of these Double Taxation schemes need to be closely looked into. For example, if you live in Estonia, India, Barbados, Jordan, Latvia, Lithuania, Norway or Singapore, the tax would be shared between the two countries. Just because they have a Double Taxation Agreement does not mean your QROPS would be paid free from tax if you hold a QROPS in Malta.
Similarly, Hong Kong, Ireland, South Korea and South Africa also have special arrangements with a QROPS in Malta. In these instances your QROPS would not be paid out tax-free. Furthermore, if you lived in any of the countries which did not have a Double Taxation Agreement with Malta, you would be charged between 15% and 35% tax on your pension income. In fact, it is our understanding that you need to get a letter from the local tax authority in the country you live in or give them some proof that you have registered for tax there or produce an income tax bill in order to get your pension paid out tax free in Malta.
For these cases, it may be much better off to transfer to a QROPS in Gibraltar who do not have Double Taxation Agreements with other countries, so they would just tax you a 2.5% flat rate of income tax at source and it would be up to the member to report income tax in the country they live in. This would get your pension out of the UK tax net and also allow freedom of investment choice.
What is a QROPS Gibraltar?
A Qualifying Recognized Overseas Pension Scheme (QROPS Gibraltar) allows your UK pension to be transferred offshore to reduce your tax burden. Effectively, you will no longer pay UK tax on your pension whilst you are offshore and after 10 years of living offshore, the reporting requirements to HMRC cease. You can draw the increased benefits, for example the 30% PCLS (Pension Commencement Lump Sum) once you have been offshore for 5 years.
If you are living in Gibraltar or outside the UK at the moment, you can take advantage of your offshore address in order to move your UK pension into a QROPS to avoid further UK taxes down the line. A QROPS is an appropriate tax efficient trust to avoid UK taxes if you are considering living or retiring abroad.
Why Transfer to a Gibraltar QROPS?
On 18 February 1965, The Gibraltar was granted independence from the United Kingdom and joined The Commonwealth. The capital of Gibraltar is also confusingly known as Gibrlatar. Gibraltar is a British overseas territory located on the southern end of the Iberian Peninsula at the entrance of the Mediterranean. A peninsula with an area of just over two and a half square miles, it’s northern borders are Andalusia, Spain. The Rock of Gibraltar is the major landmark of the region. At its foot is the densely populated city area, home to almost 30,000 Gibraltarians, amongst them British expats and many other nationalities.
The sovereignty of Gibraltar is a major point of contention in Anglo-Spanish relations as Spain asserts a claim to the territory. Gibraltarians resoundingly rejected proposals for Spanish sovereignty in referenda held in 1967 and 2002. Under its 2006 constitution Gibraltar governs its own affairs, though some powers, such as defence and foreign relations, remain the responsibility of the UK Government. Nearly 3,600 Brits are estimated to live in Gibraltar. Gibraltar is a popular destination for British expats to retire and use as a tax haven due to its historical connections to Britain, but with a low tax efficient financial structure.
What is the History of a QROPS in Gibraltar?
Gibraltar has had a rough ride on their way to get their QROPS approved by the Inland Revenue. They were one of the later jurisdictions to get approved due to Gibraltar’s ZERO rate of income tax for both residents and non-residents, which had the Inland Revenue crying foul. QROPS providers in Gibraltar actually withdrew their own QROPS Gibraltar until HMRC made their final decision.
Gibraltar wouldn’t budge on their zero income tax rate and in the end, HMRC finally decided to approve QROPS Gibraltar. Now Gibraltar is on HMRC’s approved QROPS list. But, for the time being at least, other locations such as Malta and New Zealand have taken up the slack.
Gibraltar makes a good QROPS jurisdiction due to their incredibly low tax structure and historical ties with the UK which means the English language which is widely spoken along and it has a steady political environment with a British financial structure.
Gibraltar offers a 30% lump sum upon transfer which is higher than the UK’s 25%. Like the Channel Islands, it offers flexible investments and no obligation to buy an annuity or alternatively secured pension (ASP),which means flexibility of income when it comes time to draw you pension.
Gibraltar pensions can pay out in USD, GBP, EUR and CHF.
A QROPS Gibraltar transfer is not subject to taxation unless it exceeds lifetime allowances, currently £1.8m (in 2010/ 2011 tax year).
Benefits of Moving to a QROPS in Gibraltar
What are the benefits of a UK pension transfer to Gibraltar?
• Avoids UK income tax
• Avoids UK dividends tax
• Avoids UK capital gains tax (CGT)
• Avoids 55% tax imposed in the UK upon death whilst drawing benefits and IHT
• Currency choice. You can choose to have your pension transferred to a QROPS denominated in USD, EUR or keep it in GBP
• Have the ability to make higher returns with freedom of investment
• Family Protection: Upon death, the entire pension pot gets passed on to your nearest and dearest. They get a 100% cash lump sum pay out or you could have it transferred to a future benefit trust or a trust which pays out an income to your spouse or nominated beneficiary according to a letter or wishes.
• Security: Gibraltar has a very strong regulatory structure. Click here for more on the Gibraltar Financial Service’s Pension Guide,taxation in Gibraltar as well as the Gibraltar Financial Services Authority. Gibraltar has also released QROPS Gibraltar guidance notes to trustees on the island to make sure that the regulations are strictly adhered to.
Gibraltar has had a Deposit Guarantee Scheme in place since April 1999 and an Investor Compensation Scheme since July 2003.
You can read more about Gibraltar as a centre for financial services here.
Taxation on a QROPS in Gibraltar
Personal Income Tax in Gibraltar
There is a flat rate of income tax of 2.5% in Gibraltar. Any tax you pay in the country you reside in would depend on their local tax rates. Your QROPS would be free from UK tax and most importantly would avoid the 55% tax upon death in the UK, so your whole pension pot can be passed on to your loved ones. This can be achieved in a number of ways including providing a future income rather than being passed on as a 100% lump sum. It is your choice.
QROPS Gibraltar Trustees
Who are the best QROPS trustees in Gibraltar?
STM and Sovereign trustees have been first out the gate in Gibraltar and both have a solid reputation, but we are sure more will launch in time including Brooklands and many other trustees. Email us for the latest QROPS Gibraltar news and a list of QROPS Gibraltar trustees.
The fees vary, but basically they are around £800 – £1500 per year. Normally they just take their annual fee and set up fee. The rest of the money is usually then invested in the Isle of Man or Guernsey with large insurance companies who hold your investment portfolio such as Generali or Isle of Man. They use what is known as a portfolio bond which does not invest in bonds at all; it is just a tax wrapper for your investments and somewhere to park your monies where you can then invest in a range of shares, mutual funds, ETFs, hedge funds, unit trusts, etc. or park your hard earned pension in high interest bank deposits or index-linked gilts for conservative investors.
Gibraltar is just the jurisdiction for your QROPS. The majority of your money is not parked there. So, most of the security of your pension will depend on the investments they are linked to. We tend to use a lot of Exchange Traded Funds (ETF’s) which have lower fees; most have millions under management; are strictly regulated; and are highly tradable or liquid. This way you can move to cash quickly if need be.
What Happens to a QROPS in Gibraltar on Return to the UK?
Do I need to live and retire in Gibraltar?
You can hold a QROPS in Gibraltar as long as you are not UK resident; you do not need to live in Gibraltar. If you are considering retiring abroad, a Gibraltar QROPS may be a good fit for you. Other options include moving to a QROPS in New Zealand, a QROPS in Malta, a move to a UK SIPP or leaving your pension in the UK where it is. You need a suitability report to be prepared and if you have a final salary scheme, you should have at least a critical yield analysis prepared or a full TVAS report sent to you. Every pension is different and we would need to conduct a full analysis to give best advice.
What if I return to the UK?
What happens to a QROPS Gibraltar if I move back to the UK? If you return to the UK, your pension reverts to normal UK Self Invested Personal Pension (SIPP) rules and you will pay the relevant UK taxes. But, you would get time apportionment relief whilst away and you could also take a larger lump sum to reduce your UK tax bill. There would also be no 55% tax on any growth of the QROPS whilst offshore.
You need to contact QROPS Specialists in order to figure out the best location for your pension to maximize tax efficiency whilst minimizing QROPS fees.
For enquiries and the latest Gibraltar QROPS news, please send email to
QROPS Gibraltar article written by QROPS Specialists.QROPS Gibraltar Vs QROPS Malta by Richard Malpass