Malta QROPS features in the news regularly, a new issue has arisen with the removal of phased PCLS by at least one Malta QROPS provider.
This could again place Malta QROPS trustees at a disadvantage over pensions held in the UK. So, not only can they be more expensive but they are now less flexible, as are Gibraltar QROPS.
Background on Malta QORPS and Gibraltar QROPS
Following on from a previous blog about Malta QROPS and returning expats to the UK, a QROPS provider in Malta emailed advisers with an update.
This particular update referred to the removal of phased payments for PCLS payments.
What is the PCLS?- it used to be referred to as the ‘tax free lump sum’ (typically 25% of the fund unless the pension has protected tax free cash (from before 2006)). However, as the lump sum is potentially taxable, the tax free cash terminology was ditched for PCLS.
Gibraltar QROPS already suffer inflexibility and other disadvantages when compared to UK pensions.
Removal of Phased PCLS
Referring directly to an email from Momentum Pensions (though there is no clarification as to why Gibraltar is mentioned)-
Due to complexities related to Malta Revenue Rules and UK Regulatory requirements, Momentum Pensions will no longer offer phased PCLS payments for QROPS Members at the point of retirement. An updated Retirement Options Form will be available shortly. For any existing Malta or Gibraltar Members who have not yet take their full lump sum entitlement, no change will occur until the Member takes further PCLS.
Going forward, Members who wish to take PCLS, will crystallise all benefits received in one go and take up to the maximum PCLS in one initial payment. Thereafter these will be treated as fully crystallised and no further PCLS can be taken from these crystallised funds.
Why would someone want to use phased PCLS?
It is a very useful tax planning tool where the PCLS is either not taxed (as in the UK) or taxed at a lower rate than the income from the rest of the fund as could be the case in other jurisdictions.
We have covered this before here
If anyone has a QROPS, a review of your QROPS and plans would be advisable. This update removes some of the flexibility of a QROPS and reduces tax planning opportunities for both those that plan to return to the UK and those in jurisdictions where the PCLS is taxed more favourably than the rest of the fund.
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 accept 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.
This article was republished on 9th July 2019
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