QROPS pension transfer confusion complicated by HRMC approved list

When the QROPS scheme was introduced in 2006, its intent was to allow private or corporate pension transfers from the UK to recognised countries overseas.

British citizens who had worked and accumulated pensions in the UK would be able to take them along when they emigrated, with the assumption that uptake would possibly include the continuation of contributions. However, attractive regulatory and tax regimes in the Isle of Man and Guernsey resulted in most migrants moving their pensions there rather than to their new countries of residence.

Problems began with the blurred line between offshore schemes which complied with HMRC’s QROPS regulations and those which didn’t. Unclear rules and unavoidable guesswork by financial advisors followed, with court cases resulting in scheme members being forced to pay the HMRC 55 per cent tax charge from which they had believed they were exempt.

Legislation in 2012 complicated matters still further by compelling overseas companies to open QROPS to local residents rather than aiming solely at expats. The sudden HRMC delisting of 300 Guernsey schemes resulted from the legislation and, although the schemes are now considered compliant, they’re closed to new applicants.

Gibraltar and Malta have taken over Guernsey’s crown as QROPS providers, with their legislation tweaked to comply with HMRC rules. As part of the EU, the two are seen as resilient, stable and unlikely to be delisted due to the EU’s freedom of movement legislation.

Without a doubt, QROPS is of benefit if obtained through due diligence by a trusted FA who’s aware that relying on HMRC’s QROPS list is not a great idea. As for expats retiring or taking new jobs outside the safety net of the EU, it pays to investigate fully the qualifications and experience of any and all independent financial advisors eager to push a QROPS scheme.

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