Transfers from unfunded public sector pensions – including pensions for teachers, the civil service, the armed forces, and the police and fire services – were banned from being transferred into QROPS and other defined contribution schemes when the pension reforms came into force in April this year.
However, the Teacher’s Pension has advised its members that the current rules do not extend to those QROPS schemes which are not occupational pension schemes and which have their main administration in a state in the European Economic Area (EEA).
In a statement on its website the scheme advised its members that if they wanted to take advantage of the loophole they needed to act quickly.
“We are aware that HM Treasury are planning further legislation to cover the schemes described above within the restrictions on transfers from unfunded Public Service Pension Schemes,” it said.
“Consequently members need to be aware that in order for Teachers’ Pensions to make a transfer payment they must submit the completed discharge paperwork before any such legislation comes into effect.”
The UK Treasury said it was working to close access to the transfer, and was currently consulting with pension schemes ahead of introducing legislation to tighten the rules.
“We are clear that the transfer restrictions from unfunded public service pension schemes should apply to transfers to qualifying recognised overseas pension schemes, including those based in the European Economic Area,” it said in a statement.
The criteria that the QROPS scheme be in a state in the European Economic Area would include Malta but rules out places like Gibraltar, according to QROPS experts.
“It does seem to be the case that it can still happen but it can happen to Malta but not Gibraltar,” said Gerry Kelly of Sovereign Pension Services.
“However, I’m not sure how much activity is taking place as a result of this. It is just a loophole that has come up.” He said.
The government has previously admitted there are loopholes in the system where overseas transfers are allowed if pension schemes are administered in the EEA.
Last month HM Revenue & Customs dropped thousands of QROPS from its recognised overseas pension schemes list, with Australian schemes faring the worst. This was largely because regions did not comply with UK rules that only allowed pension holders’ early access to their savings if they were facing “serious ill health”.
