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By Des Cooney
When transferring your UK pension to a scheme overseas, it is important to check that it meets the conditions to be accepted as a Recognised Overseas Pension Scheme (ROPS). Not all transfers to overseas or offshore schemes are recognised as being QROPS transfers. It is therefore essential to verify that the scheme receiving your UK benefits is on a list published by HM Revenue & Customs (HMRC). If the scheme is not on the ROPS List any transfer would be treated as a transfer to a non-qualifying overseas scheme. This may result in substantial penalties being applied by HMRC at the time of transfer.
ROPS List – How do I know if it is a legitimate scheme?
There are currently more than 900 QROPS registered across 41 financial jurisdictions. The list has seen dramatic growth since the introduction of these schemes in April 2006. The Isle of Man and Guernsey at present dominate the market in terms of being the most popular jurisdictions for hosting QROPS.
In order for a scheme to be classified as a Qualifying Recognised Overseas Pension Scheme (QROPS) it must first of all be a Recognised Overseas Pension Scheme and provide benefits in respect of retirement, ill health, death or similar circumstances. If it meets these requirements, the scheme must take certain additional steps to qualify as a QROPS as defined by the legislation.
This list consists of pension schemes that have informed HMRC that they meet the conditions to be a ROPS and have asked to be included on the list. It is important to note that the list is self-certified by QROPS providers; HMRC do not have an official approval system for ROPS. It is therefore the responsibility of the individual to find out if there is tax to pay on any transfer of UK pension savings.
The list is usually updated twice a month by the ‘Pension Schemes Services’ department. A scheme’s name will be promptly removed from the list once HMRC is aware that it has ceased to be recognised. Furthermore, should HMRC have concerns about the scheme’s status at any time, then the scheme’s name may be removed whilst HMRC carries out further checks.
There can be certain disadvantages in transferring to a QROPS including the potential deregulation of the scheme. Schemes that are to be removed from the list are notified in advance by HMRC; the reasons for delisting are explained to the scheme manager. A scheme is generally delisted if UK Pension administrator’s find that there is insufficient pension regulation in place in a given jurisdiction. HMRC make every effort to distinguish between providers who have applied for an exemption from regulation and those who have not. They are under no obligation to make public their reasons for delisting a particular scheme. It follows therefore that members, who are concerned about their scheme being removed from the published list, should approach their scheme manager in the first instance.
The emergence of Malta as a player on the European market
Since 2009 Malta has established itself as a listed QROPS provider. Malta has the key advantage of being able to offer EU country-based schemes to the marketplace. 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! Individuals who intend to retire to a European country, and have their UK pensions transferred to a recognised overseas pension scheme, should give serious consideration to Malta as the jurisdiction of choice. Malta has an existing double-taxation agreement (DTA) framework in place. This framework consists of agreements with 59 other countries including the UK, and reknown EU retirement destinations such as France, Portugal and Spain.