Thousands Removed from HMRC QROPS List
The cull started as overseas schemes had to adhere to the UK’s new statutory instrument which does not allow early access to a pension before 55 unless in ill health. This meant the axe for thousands of Australian Superannuation schemes, Australian SMSF’s, New Zealand kiwisaver savers, Irish QROPS and Swiss QROPS were amongst the biggest losers due to their ability to allow early access or allowing funds to be borrowed to invest in residential property.
The number of schemes on the ROPS list, which has approximately 3,800 QROP schemes listed on HMRC’s site on the 9th June this year, has now fallen to only 663 overseas pension schemes. Most QROPS in Spain, France, Germany and Hong Kong schemes have also been struck off. Spain now just has two schemes left and Barbados has no ROPS at all.
I must admit, I knew that many Australian Supers would get the cull and thought it was likely that HMRC wouldn’t change its rules to suit that of another country, but some Australian SMSF’s were set up with QROPS in mind, so I am surprised to see all the SMSF’s culled. Perhaps in time, there may be some Australian SMSF’s added.
QROPS Winners and Losers
Australia was by far the biggest loser with over 1,600 QROPS struck from HMRC’s list of Recognized Overseas Pension Schemes (ROPS). Australia has just one solitary scheme left, the Local Government Australian Superannuation Scheme, also known as the LG Super. Click here to find out how to transfer there.
LGsuper looks after over $9.5 billion in retirement savings for around 90,000 members
The biggest winners will be Gibraltar and Malta who are now the default ROPS. Gibraltar has a flat income tax of only 2.5% and is suitable for most international destinations, although Gibraltar has no Double Taxation Agreements, so you could end up paying income tax twice on your pension.
Malta has Double Taxation Agreement with most EU countries and over 65 Double Taxation Agreements altogether. In many cases, this means a ROPS in Malta would avoid taxes in both the UK and Malta, with no tax on death. Usually, you would just pay income tax at retirement in the country you reside. This may be less or more than the UK and may also be as low as zero. You need to contact a QROPS specialist or international tax specialist to find out which jurisdiction may be best for your pension.
For British expats in Australia, a UK pension transfer to Malta maybe the best solution until retirement age, then a transfer to the local government super scheme, LG Super, when you want to draw your retirement income and you are 100% certain you will spend the rest of your life in Australia.
Why the LGSuper is still on there is a mystery. They allow the same access for financial hardship as all the other Aussie Supers as per their site – https://www.lgsuper.org/member-accessing-my-super/.
You can also access it as a temporary resident. So, you could fly there, stay for a few months, then cash in your pension with no tax on it. This is exactly what HMRC is trying to avoid, “pension busting”, so who knows why the Aussie government pension scheme gets a “free pass”. One of the drawbacks to the Australian scheme is you have to be 60 to access it in most cases.
HMRC also makes it clear that the list isn’t a list of approved QROPS, but a list of schemes that they believe to be a ROPS. This means that more could be culled in the future or added.
For Brits in Oz, a UK pension transfer to Malta is likely the way forward though, especially if you are unsure exactly where you want to retire.
Free QROPS Pension Transfers
QROPS Specialists are offering free QROPS pension transfers out of Australian QROPS, NZ Kiwisaver schemes, Irish QROPS or any other schemes where your pension may be stuck. Please note, you will need to check with your existing scheme if transfers out are allowed and any exit or tax charges that may be applied.
We can transfer your pension to a more tax efficient jurisdiction in Malta, Gibraltar of the Isle of Man under the new ROPS overseas pension schemes.QROPS List Stripped Down to its Skeleton by Richard Malpass