Are QROPS suitable for UK resident and domicile persons

Our Global Head of International Pensions looks at the effect of last week's UK Budget on QROPS.

The UK government “dropped a pensions bombshell” in last week's Budget. Should this be seen as genuine freedom to manage your pension fund, or a cynical tax grab? The devil will be in the detail, but the Office for Budget Responsibility has confirmed that the Treasury should earn an extra £3bn in tax during the first four years of these proposals. We still believe that QROPS will offer substantial tax planning advantages for individuals with sizeable funds.

There has been considerable discussion as to whether the legislation and Statutory Instrument laying out the guidelines to QROPS allow UK resident and domicile people to take advantage of the potential benefits of such a contract. Whether or not it is advisable for clients to consider a QROPS as an alternative to a UK registered pension will depend upon advice provided by a suitably-qualified pensions adviser. Under no circumstances should it be considered a panacea for all. The implications in cost, tax, benefit provision and security should be fully investigated.

At a meeting of AMPS (Association of Member-directed Pension Schemes) in November 2013, the issue of offshore pensions being marketed to UK Scheme members where the member is not and has no intention of residing overseas was raised with HMRC. As has been reported, HMRC confirmed that, in order to comply with European Fundamental Freedoms of movement, that this was a feature built into the design of QROPS.

However, there is ongoing work looking at certain overseas arrangements to combat what is generically called “pensions liberation” and breach of investment guidelines. If you are offered a scheme that allows early access (before NRD) to either capital or income, or investment into Taxable Property (Regulations 2006/1960), this is likely to be looked into by HMRC.

The above also brings into question whether the FCA will in future require UK intermediaries to consider a QROPS as part of their advice process, even if it is dismissed.

For further information on how TMF Group International Pensions can help, please either call +44 20 7832 4960 or e-mail internationalpensions@tmf-group.com

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Bethell  Codrington
Opinion
  Opinion

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