The Isle of Man Government says it has been working on a 'number of options' to cope with potential changes to the Qualifying Recognised Overseas Pension Scheme (QROPS) regime announced by the UK government last year and due to come into force on 6 April 2012.
Stuart Clifford, Chairman of the Isle of Man’s Association of Pension Scheme Providers (APSP) said: "We have with Isle of Man Government lined up a number of options, depending on what emerges on UK Budget Day, but have taken to keep these in the locker. In the best traditions of the island’s “freedom to flourish” ethos, all parties are poised and ready to swiftly implement whichever planned solution is best suited to the new QROPS regime."
HMRC has been monitoring QROPS following exploitation of the rules, which has seen them being marketed to access pension lump sums. According to HMRC, an individual who leaves the UK and transfers their pension savings should be in broadly the same position as someone with pension savings who remains in the UK.
In addition, HMRC is proposing to extend the scheme’s reporting requirements from five years to 10 years, commencing from the date of the pension transfer.
One of the main changes HMRC is proposing is Condition 4, whereby as from 6th April, 2012, anyone with a QROPS should not benefit from tax relief that is not available to residents. "It puts the onus on the finance centres’ own legislature to change their tax regulations to encompass QROPS," explains Gavin Pluck, European Director at Guardian Wealth Management.
In effect, this means that jurisdictions such as Guernsey and the Isle of Man will have to decide between a zero or 20% tax rate on pensions for both residents and non-residents.
Guernsey has already said it is looking into plans to introduce a completely new pensions regime open to both Guernsey residents and non-residents to cope with changes to Qrops rules.
Clifford defends Isle of Man's wait-and-see approach: "What we saw in December was HMRC’s clear intention to prevent abuse in the QROPS market and we welcomed it. As a jurisdiction we have never been in the non-compliant category, whether by letter or spirit, nor do we ever intend to be. If anything changes between the draft and final rules we don’t want to get inadvertently caught out. Our pensions industry is growing and has many facets to it beyond QROPS, which is evidenced by the calibre of clients which have chosen the Isle of Man for domiciling their pension schemes. We don’t want to run the risk of taking a step back by jumping the gun. It may seem overly pragmatic, but in the pensions world that is a virtue.’
John Shimmin MHK, Minister for the Isle of Man Department of Economic Development, added: "The Government recognises the importance of the pensions industry and will continue to support the APSP in ensuring that we remain competitive whilst maintaining our excellent reputation."
The Guernsey Association of Pension Providers (GAPP) has been lobbying to have Condition 4 removed, or at least deferred for another year to enable further consideration of its implications and to enable the affected jurisdictions to address any particular concerns of HMRC. "This would then enable QROPS providers to introduce necessary changes in a more measured way than has been possible given the major new changes proposed with only four months’ notice and with only two months between the end of the consultation period and the implementation date," explains GAPP.
‘Promising lead’ or ‘Back to the lab’?
PA360 2019 revisited
Complaints triple in past year
Our weekly heads-up for advisers
Tracking real performance