Updated on Tuesday, the list now shows just three schemes – all run Bank of Montreal (BMO) – that comply with the HMRC’s ‘pension age test’, introduced in April 2015 as part of the pension freedoms.
The proviso requires schemes to ensure savers are not able to access funds before the age of 55 in line with UK law except for in cases of “serious ill health”.
In Canada, Rops are primarily ‘registered retirement savings plans’, which can be cashed in partly or fully at any time, regardless of age.
As a result, the number of schemes approved by the UK tax office has fallen from 95 in April 2015, to 69 in September, to now just three.
Long overdue
Bethell Codrington, global head of international pensions at TMF Group, said he is “not surprised” the schemes have been dropped.
He questioned why it has taken so long for HMRC to blackball Canadian Rops, having informed HMRC last year that the schemes did not comply.
Codrington also claimed the tax authorities had written to Canadian providers in the summer asking them to confirm that their Rops met the conditions of the ‘pensions age test’.
“We [TMF] informed HMRC in the summer of 2015 that Canadian Rops did not meet the ‘pensions age test’ as required in 2015, and provided them with extracts of the Canadian legislation showing this.
“We have subsequently consistently questioned why they were left on the list of Rops, leaving clients open to ‘un-authorised payment charges’.
“From information we have, it would appear that HMRC started writing to Canadian providers in the summer, and they have at last taken notice,” he told International Adviser.
Codrington raised concerns that the lack of compliant schemes has left British expats living in Canada with limited pension transfer options.
“The problem now, is what do Canadian residents do, who do not want to leave their pensions in the UK.
“A transfer to an alternative non-Canadian scheme might open them up to a tax charge on the capital value transferred. The Canadian legislation is vague on this at best. We are working with the Canadian authorities to try and get some definitive answers,” he explained.
Australian Rops removal
It follows a similar move by HMRC in July last year to remove 1,600 Australian Rops from its list for failing to meet the pension age conditions. Instead, the schemes allowed early pay outs in cases of “serious financial hardship”.
Up until September 2015, just one public sector pension scheme appeared on the list, after which self-managed superannuation funds – similar to the UK’s self-invested personal pension schemes (Sipps) – began to be approved by circumventing the pension age test.
HMRC approval is based on the requirement that expats must be aged 55 and over to use the transfer products.
Last month, STM, which has operations in Malta and Gibraltar, Spain, and Jersey, launched a Gibraltar-based Australian superannuation scheme, revealing there is market there for solutions aimed at British expats.
In August, international pension provider IVCM (formerly Brooklands Pensions) announced that an Australian superannuation plan it runs in conjunction with Tidswell Financial Services became the first retail super scheme to get back on the HMRC list – a trend Davies expects will continue.
Demand for Rops
Meanwhile, Paul Davies, director of bdhSterling (formerly Global QROPS), revealed last month that despite the HMRC removals, the advisory firm specialising in Brits moving to Australia, has seen a dramatic increase in the number of clients wanting to tranfer their pensions into Rops.
This is despite some providers admitting earlier this year that the UK’s pension freedoms have dampened appetite for the solutions.
HMRC were contacted at the time of publication.
