Providers agree that while final legislation announced in the Budget will not have a material impact on UK expats retiring overseas, there will be increased obligations on providers and QROPS jurisdictions.
David Higgins, Technical Director at The Overseas Pension said the Budget announcement is good news for the legitimate international pensions industry and in particular QROPS. "There has been too much liberal interpretation of the rules across jurisdictions which has resulted in the encashment of pensions which was clearly not the intent when HMRC gave tax relief on contributions. In addition this tightening up of the rules will give clients more comfort and reduce some of the complexity international advisors have faced."
Richard Buchanan, Operations Director at Alexander Forbes Offshore said part of these changes will place a greater layer of reporting obligation on those overseas firms who have obtained QROPS approval.
"Best advice for intending expatriates who wish to retire overseas will continue to be to consider the QROPS route for any UK pension savings. However these changes will make it imperative that prospective clients deal with a reputable firm located in a quality jurisdiction where compliance with the new QROPS rules is the norm. HMRC have the power to withdraw QROPS approval from those schemes that fail to comply with the rules which would negate the benefits of any transfer.”
Tony Hales, Managing Director at Stadia Trustees, warned that the new legislation may reduce the marketability of QROPS providers who currently offer more than the 30% maximum allowable Pension Commencement Lump Sum (PCLS), resulting in a reduction of QROPS schemes on offer.
On changes to tax relief, Hales noted that many QROPS do not apply the same tax relief and income tax charges to resident and non-resident scheme members. "In order to comply with the new legislation many QROPS jurisdictions will need to change the tax rules applied to the pension schemes they regulate thereby retaining their ability to provide QROPS," he said.
Earlier planning on the part of those looking to emigrate and higher costs are two further potential consequences of the changes, according to Hales.
"The reporting requirements now mean that HMRC must be notified in the event that a payment is made within the 10 years from the date which the transfer took place. Previously, reporting was only required within five years from date of leaving the UK. The impact of this is that those looking to emigrate from the UK need to give due consideration to any existing UK pensions arrangements that they may have, with a view to transferring these to a QROPS scheme sooner rather than later."
“The change to the reporting period has huge administrative implications for QROPS providers and the associated cost of providing this information to HM Revenue & Customs (HMRC) may impact on the annual fees charged by QROPS providers.
“Interestingly, HMRC have not imposed these changes retrospectively, and this may create a wave of activity for QROPS providers between now and the 5th of April, wanting to entice those expats to transfer to a QROPS scheme before this date so as to take advantage of the old rules.”
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