Furnish people with the facts and a more enlightened population will emerge. QROPS (qualifying recognised overseas pension schemes) were introduced in 2006 as part of a major overhaul of Britain’s pension framework, in order to comply with an EU directive that pensions be free to move across Europe’s borders. They have become extremely popular over the past seven years for individuals who relocate from the UK to counties such as France, Spain and Australia. During 2012, the use of QROPS by UK citizens retiring abroad came under the spotlight. For some time HMRC had been unhappy with the popularity of QROPS and the territories that were hosting them, which the Revenue suspected were used by some for tax avoidance.
Parking your pension in places where the sun shines may seem an attractive proposition. It can also be a huge mistake if the location turns out to be a ‘black hole’ in terms of being able to access the funds without complications. Given the UK Government’s publicly-stated vows to crack down on all forms of tax evasion, it was of no great surprise to the pensions industry that overseas pension schemes would come under some level of scrutiny.
QROPS – HMRC concern
As the new legislation evolved, HMRC decided that it was time to revisit the procedures governing the transfer of pensions overseas that have already received tax-relief in the UK. On 6 April 2012, HMRC’s amended the legislation and published a list of QROPS providers with approved status. At midnight on 5 April 2012, the existing list was suspended and an “updated” QROPS list posted on the HMRC website. Guernsey, among other jurisdictions, was de-listed by HMRC as it was concerned that certain schemes were paying out benefits gross to clients, without any tax being paid.
Recommendation Individuals who wish to move their UK pensions overseas are advised to seek out EU country-based schemes, where a double-taxation agreement (DTA) framework exists. As such, Malta ‘fits the bill’ in that it has in place 59 DTA’s with other countries. Given that they are EU member states, the UK, France, Portugal and Spain all have DTA’s with Malta. There are numerous territories which qualify for the hosting of QROPS. However, when making your choice it is always reassuring if you are on the right side of the fence! Before undertaking any QROPS transfer you should consult with a professional adviser.