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Offshore QROPS providers warn Brit expats over Brexit effects
| Published: | 24 Oct at 6 PM |
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Hundreds of thousands of British retirees living overseas may be at risk of changes to their QROPS after Britain leaves the EU.
At the present time, the British government has revealed no strategies which would affect retirees who’ve transferred their pensions to a QROPS, but experts are warning changes might well take place. Those most at risk are those retiring in countries which don’t have a QROPS provider.
However, rumours circulating in the financial sector indicate HMRC officials have stated during stakeholder meetings with pension providers that restrictions may be on the cards. If so, they are likely to limit expats’ freedom to transfer to a provider of their choice by only allowing transfers to QROPS in expats’ countries of residence.
Just a few days after the Brexit result was announced, offshore financiers Old Mutual Wealth raised concerns about exactly the same restrictions being introduced. The company is now advising retirees wanting to transfer to a QROP{S to do so as quickly as possible, as it’s possible the restriction could be introduced immediately after Article 50 is activated.
Of the 42 financial hubs offering QROPS transfers, only a fraction offer the ‘third party’ QROPS allowing pension holders to live outside the country where the provider is based. Malta, Gibraltar and the Isle of Man are the most-used offshore centres, with Guernsey and several other offshore locations already limiting QROPS transfers to residents.
Another potential problem caused by Brexit involves the EU concession which allows EU-based QROPS providers to offer flexible pension freedoms similar to those available to UK residents. Simply put, non-EU based providers can pay 30 per cent tax-free, but must retain 70 per cent of transferred funds to pay the saver a retirement pension. Brexit will have to cancel this requirement, resulting in the 70/30 rule possibly being extended.
Also likely to come under the microscope is the fact that tax residency does not have to be proved by expats wishing to qualify for a QROPS. The lack of required proof means expats returning home may pay less tax on retirement income than holders of a UK onshore pension, but this perk is likely to be removed post-Brexit.
At the present time, the British government has revealed no strategies which would affect retirees who’ve transferred their pensions to a QROPS, but experts are warning changes might well take place. Those most at risk are those retiring in countries which don’t have a QROPS provider.
However, rumours circulating in the financial sector indicate HMRC officials have stated during stakeholder meetings with pension providers that restrictions may be on the cards. If so, they are likely to limit expats’ freedom to transfer to a provider of their choice by only allowing transfers to QROPS in expats’ countries of residence.
Just a few days after the Brexit result was announced, offshore financiers Old Mutual Wealth raised concerns about exactly the same restrictions being introduced. The company is now advising retirees wanting to transfer to a QROP{S to do so as quickly as possible, as it’s possible the restriction could be introduced immediately after Article 50 is activated.
Of the 42 financial hubs offering QROPS transfers, only a fraction offer the ‘third party’ QROPS allowing pension holders to live outside the country where the provider is based. Malta, Gibraltar and the Isle of Man are the most-used offshore centres, with Guernsey and several other offshore locations already limiting QROPS transfers to residents.
Another potential problem caused by Brexit involves the EU concession which allows EU-based QROPS providers to offer flexible pension freedoms similar to those available to UK residents. Simply put, non-EU based providers can pay 30 per cent tax-free, but must retain 70 per cent of transferred funds to pay the saver a retirement pension. Brexit will have to cancel this requirement, resulting in the 70/30 rule possibly being extended.
Also likely to come under the microscope is the fact that tax residency does not have to be proved by expats wishing to qualify for a QROPS. The lack of required proof means expats returning home may pay less tax on retirement income than holders of a UK onshore pension, but this perk is likely to be removed post-Brexit.
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