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The Revenue has suspended its notification list of qualifying recognised overseas pension schemes (QROPS), after discovering the inclusion of schemes that do not meet the pension age test.
The Revenue has suspended its notification list of qualifying recognised overseas pension schemes (QROPS), after discovering the inclusion of schemes that do not meet the pension age test.
The erroneous entries will be removed, and advisers should not “rely on previous lists as notification by the pension scheme to HMRC,” the tax department announced, adding, “In the meantime a pension scheme established in a country that can be required to make payments before age 55 – in circumstances other than ill health – will not be able to meet the pension age test if the scheme allows the member to receive transfers before age 55”.
James McLeod, head of pensions at financial services provider AES International, urged advisers to exercise caution over transfers until the new QROPS list is published on 1 July.
He said, “We do not anticipate the removal of schemes based in the Isle of Man, Malta or Gibraltar, but it is essential to check whether a scheme meets the QROPS criteria. The action from HMRC of late, suggests transfers deemed to have been made to a non-compliant scheme are likely to be subject to the punitive unauthorised payment charge.”
McLeod continued, “When the list is again published, the taxman should make it a document on which people can rely, as had been the case in the past. Advisers and transferring schemes should be able to obtain at least some assurance that appearance on the list means a scheme meets the QROPS criteria.”
Pensions specialist Paul Clark said, “Schemes in general have tended to place undue reliance on the list as a means of ensuring particular non-UK schemes meet the QROPS requirements.
“The Revenue makes it clear in the Registered Pension Schemes Manual (RPSM13104090) and Pensions Tax Manual at PTM112400 that the ‘published list is there so scheme administrators of registered pension schemes and overseas pension scheme managers can, as one part of their due diligence, verify that an entity that is on the list has notified HMRC it meets the conditions to be a ROPS … [it] is not intended for use for any other purpose and is not intended to give assurance that HMRC has checked all the information provided for any named scheme. Nor does it guarantee that a transfer made to an entity that appears on the list will be free of UK tax.’”
Clark, an associate at financial planning company Technical Connection, added, “In the absence of the list, even when schemes do not rely on it, a significant element of their due diligence capability has fallen away until the new one is published. If this happens on 1 July 2015 as expected, it simply means that a ROPS transfer will be delayed by a couple of weeks.
“The penalties for transferring to a non-UK pension scheme that is not a QROPS are significant and would result in charges of at least 70% of the transferred amount: 40% unauthorised payment charge, 15% unauthorised payment surcharge, and the 15% scheme sanction charge. The simple answer is for the administrator to delay the transfer, so as to mitigate the risks.”
