If you are about to take out a Gibraltar QROPS you may like to understand the legislation, security and support you will have. Is it as good as the UK? What happens if things go wrong?
This article starts with comments from HMRC’s website HMRC ROPS list as websites and adviser reports often say that a Gibraltar QROPS is approved by HMRC.
Fact: HMRC provide a bi-monthly update on ROPS (Recognised Overseas Pension Schemes), which are commonly known as QROPS, and on the wesbite it says,
“HMRC can’t guarantee these Recognised Overseas Pension Schemes (ROPS)”
In other words, the due diligence undertaken by the adviser is going to be paramount and, in life, we all know sometimes things go wrong. When they do, in the UK or the USA, we have clear complaints procedures and bodies set up to assist the consumer. Therefore, when things go wrong, it may mean the consumer has to contact the relevant authorities for help. In financial services this may be the regulator.
Regulation- Gibraltar QROPS
A QROPS is a pension and it is usual for many jurisdictions, where pension funds are held, to have a Pensions Regulator. Well, think again!
Gibraltar does not have a Pensions Regulator and so the trustees of these schemes are regulated by the Gibraltar Financial Services Commission. If something goes wrong, and your adviser firm does not wish to help or no longer exists, then surely consumers can get help from the GFSC if they have a problem with their Gibraltar QROPS!
Well, no they cannot! This can be seen here Gibraltar Financial Services Commission
I quote, “All firms licensed in Gibraltar by the GFSC are expected to have in place appropriate procedures for complaints handling, which should be designed to ensure that your complaint is appropriately addressed and dealt with in a thorough and prompt manner.
It is important to be aware that legally it is not the role of the GFSC to resolve disputes between consumers and licensed firms. We are unable to give advice to complainants, or provide arbitration in commercial disputes”
If the GFSC cannot help then one would expect consumers to be able to go to the equivalent of a Financial Ombudsman where there is a dispute about the advice or Gibraltar QROPS itself. The problem is that Gibraltar does not have a Financial Services Ombudsman either.
As you can see from this link Gibraltar Proposes Financial Services Ombudsman There has been talk about this subject for a number of years, but consumers that have a problem with a Gibraltar QROPS still do not have recourse to a Financial Services Ombudsman after 9 years!
Gibraltar QROPS and Gibraltar licenced advisers.
It is not just the Gibraltar QROPS that come under the regulation of the GFSC. There are financial advisers licenced in Gibraltar to give financial advice to the public, some of whom have “passported under EEA” services throughout the european union. Where does the consumer stand if one of these advisers does not handle a complaint to the satisfaction of the consumer?
If the advice happens outside Gibraltar, then the reality is, not very far.
No Pensions Regulator, no Financial Services Ombudsman and the GFSC who are unable to give any help or advice to victims of poor advice in the remainder of the EU!
Gibraltar QROPS appear to have gone from virtually nowhere three years ago to being one of the most popular recommendations on expat adviser websites.
Searching the internet, the main reason for taking out a Gibraltar QROPS is given as the low tax rate of 2.5% and sometimes the comment “you will not have to pay tax elsewhere” – however, this is inaccurate and little mention is given to the fact that where there are no Double Taxation Treaties in Gibraltar the 2.5% tax is non-recoverable, and you may have to pay tax where you are resident as well.*
In some instances, like South Africa, then people with pensions less than £100,000 in value taking a normal yield are actually going to pay more tax by transferring to Gibraltar QROPS then leaving it either in the UK or selecting other jurisdictions to host their pension. That is before charges are even considered or the type of investment vehicles are assessed.
The right to request a Gibraltar QROPS trustee to move your pension to another trustee
By now, one should not be surprised to find that where we see virtually no real regulatory protection, that also there are no set rules in place currently (December 2015) to enforce a Gibraltar QROPS trustee to agree to move your pension to another trustee, or back to the UK, or to another country. I think you have to understand if you move your pension into Gibraltar then your pension could well remain in a Gibraltar QROPS for a long time (if not forever). Whilst that may not be of concern, every consumer has to understand that means that they will have no control over future charges, no ability to take up alternative offers, and no comeback if things go wrong.
We have real life examples of the impact of this on jurisdictions like Guernsey which used to be a main destination of QROPS, was removed from HMRC lists, and now it is extremely difficult to get Trustees to reduce charges or transfer out pensions – with 2 different trustees our experience is to date one has taken 8 months and still not moved, and the other took 11 months and lots of “justification” and a pretty determined client! We are not suggesting this is the same as Gibraltar QROPS which are set up differently and Gibraltar has a right to reply on this so that the regulator can ease any future concerns that this would not happen through legislation.
There may be genuine reasons for recommending a Gibraltar QROPS but the consumer must be aware of the regulatory support, or lack of it, before moving UK pensions to a Gibraltar QROPS or engaging a financial adviser licenced in Gibraltar. If something were to go wrong, the only protection appears to be the robustness, or otherwise, of the firm’s own complaint process.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
- Channel Islands Financial Ombudsman
- 10 Reasons to use a QROPS. Facts and Myths, QROPS Increased Flexibility (7)
- Gibraltar QROPS- New investment rules
- HMRC QROPS list- Suspended
- Are QROPS a Good Idea?
Share this story