Recognised overseas pension schemes

QROPS have been on the radar of HMRC and the Pensions Regulator in the UK due to multiple “unlocking” schemes designed to allow access to funds whilst theoretically avoiding tax; however, the truth is that HMRC eventually catch up with the clients of the funds, who end up picking up a 55% tax bill for illegal pension unlocking and tax avoidance. Ironically, the clients have often been advised to take the action on the basis of overseas websites advising people to avoid 55% tax on death!

Separately, the FCA is seeking to ensure that advice comes from reputed regulated sources to make sure that clients are not losing benefits in defined benefit schemes or with guarantees. Transfers have been arranged in the past to a QROPS Recognised overseas pension schemes under the premise of access but with huge hidden fees and charges amounting to 10-15%. Clearly some of these offshore salesmen and trustees do not care about the client, only how high a fee they can charge.

Each regulator and organsiation has their own ways of tackling the problem of abuse but they all concur that one step is to reduce the number of worldwide territories and trustees that can be listed as Recognised overseas pension schemes. The latest list of Recognised overseas pension schemes is available on the HMRC website.

Separately the FCA and the Pensions Regulator have issued new guidelines about dealing with pension transfers, working closely with HMRC with respect to recognised overseas pension schemes. The FCA has stipulated who can sign off these particular transfers – essentially any scheme with a guarantee, a protection like increased Pensions Commencement Lump Sum (PCLS) or a Defined Benefit scheme has to now be signed off by a current UK regulated adviser who has either the G60 or AF3 qualification; this includes transfers to recognised overseas pension schemes.

Recognised overseas pension schemes conclusion

Recognised overseas pension schemes will continue to attract the tax mans attention whilst abuse is still rife, but publishing a much abbreviated list of Recognised overseas pension schemes means that HMRC can now concentrate on those schemes that were previously on the list but that have now been removed as recognised overseas pension schemes; beware if your scheme is held in one of these and you are avoiding tax! There is a potential 55% tax charge that could be applied on the whole original pension pot, irrespective of its current value or if benefits have been taken.

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 in July 2015

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About the Author

James Pearcy-Caldwell

I have lived in various countries, but always remained firmly attached to the good old UK. My only goal is to take the experience and insider knowledge that I have, and be transparent with people so they understand the impact of their decisions.

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