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26/03

QROPS changes creates inconsistencies but opportunities still exist

The recent Statutory Instrument* has confirmed QROPS (Qualifying Recognised Overseas Pension Schemes) will temporarily be unable to benefit from the full UK pension flexibilities. However, this does not apply to all QROPS. Some jurisdictions will be able to offer the pension flexibilities from 6 April 2015, depending on the qualifying rules relating to that specific jurisdiction and local jurisdiction amendments. Opportunities will exist post 6 April 2015 for those using a QROPS to gain flexible access to their pension savings in a tax efficient way.

In some jurisdictions, in order to qualify as QROPS, a scheme’s rules must provide that at least 70% of a member’s UK tax relieved fund provides an income for life. However, schemes which qualify due to being established in an EU jurisdiction, such as Malta, do not rely on this requirement. This means that clients who hold a QROPS in such jurisdictions are able to benefit from the new pension flexibilities, providing the local rules are changed to allow this.

The decision on which QROPS to choose will now need to take into account how the client intends to access their pension fund and whether the full pension flexibilities are required. This is however just a short term consideration. Longer term it is anticipated that all QROPS will be able to benefit from the new pension flexibilities, as legislation to replace the 70% rule will be forthcoming, although what exactly any new conditions will entail is unknown.

Jon Greer, pensions’ expert, Old Mutual Wealth, comments:

Jon Greer, pensions’ expert, Old Mutual Wealth“The new requirements relating to QROPS may have created some inconsistencies in the market, but good financial planning opportunities using QROPS still exist. Regulations will vary according to the jurisdiction of the QROPS and some jurisdictions will allow the client full flexible access to their money. Advisers and clients should check with their QROPS provider if they are in doubt as to how the new regulations impact them.”

 

*The Overseas Pension Schemes (Miscellaneous Amendments) Regulations 2015 - www.legislation.gov.uk