QROPS Rules 2017 – Are the new QROPS rules fair?


QROPS Rules  2017 – Are the new QROPS rules fair?

The QROPS rules 2017 have altered the QROPS landscape completely. I refer to the 9th March as Q Day and the announcement by the Chancellor as the “QROPS Budget 2017”, following on from the A Day pension simplification rules  introduced in 2006.

QROPS Rules  2017

Taken directly from the QROPS Budget 2017

“As announced at Spring Budget 2017, the government will legislate in Finance Bill 2017 to apply a 25% tax charge to pension transfers made to QROPS. Exceptions will be made to the charge, allowing transfers to be made tax free where people have a genuine need to transfer their pension, where:

  • both the individual and the pension scheme are in countries within the European Economic Area (EEA) or
  • if outside the EEA, both the individual and the pension scheme are in the same country, or
  • the QROPS is an occupational pension scheme provided by the individual’s employer”

I would like to focus on the first two bullet points.

 

EU free movement of capital

The first point of the QROPS rules in 2017 is pretty much covered by the EU freedom of movement of capital across borders. This underpins the single market and so if  individuals live and work in an EEA state then it would seem fair that they can move their capital- in this case the pension. One could argue that this right does not extend to them leaving the EEA within a short period.

 

Living outside of the EEA- QROPS Rules 2017

To qualify for a QROPS, an non-UK jurisdiction will need to meet two tests

  1. Regulatory Requirements
  2. Tax Recognition Test

( Included in this are minimum retirement ages, access to local residents among other tests – subject too large to cover here).

In other words, the jurisdiction has to satisfy these requirements to offer a QROPS. Countries like New Zealand , Australia and Hong Kong, for example, are able to satisfy these conditions.  Expats that live and retire there can still move their pensions without the 25% tax , if the advice is correct, and this seems fair.

I asked if the new QROPS rules were fair. A lot of comment has been polarised on this issue but I would leave this as an open question.

If someone leaves the UK to a country that is not able to meet the tests of HMRC or finds that that country offers QROPS that have restrictions on entry or other restrictions, do they have the right to move their UK pension to a jurisdiction where they do not live, and where they will not retire? A country with which they have no connection and, DTAs allowing, will pay no tax?

Were the previous rules too generous?

 

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.

This article was published on 16th March 2017

“About

Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

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