From April 2017, all recognised overseas pension schemes (Rops) outside the EU will need to be approved by a local regulator in the country where they are based or face being struck off the HM Revenue & Customs’ (HMRC) list, which details the schemes currently available to UK citizens abroad.
Changing domestic regulations
Speaking exclusively to International Adviser, Stewart Davies, group chief executive of specialist pensions provider Momentum Pensions, said Gibraltar and the Isle of Man may need to introduce new regulations on overseas pensions so that schemes based in the offshore jurisdictions comply with the new rules.
Davies, whose Malta-based firm has offices in the UK, the Isle of Man and Gibraltar, said he expects regulators in the latter jurisdictions to respond to the UK government’s shifting Rops eligibility “before Christmas”.
“Gibraltar and Isle of Man should now be in scope to offer full flexibility with effect from April 2017 (or Royal Assent), subject to amendments to local legislation in the respective jurisdiction to allow this.
“We are currently seeking clarification as to whether individual Gibraltar schemes will require regulation ahead of these proposed changes
“I expect both jurisdictions are currently preparing their response and we expect this to come out before Christmas,” he said.
Scrapping the 70% rule
Changes to HMRC’s Rops eligibility criteria were announced in a draft of the Finance Bill, published on 5 December, and is part of a wide-ranging UK reforms to the way Rops are taxed and regulated.
The new requirement will replace the current 70/30 rule, where unregulated non-EU Rops must allocate 70% of funds to provide a member with an income for life.
Scrapping the rule means all non-EU Rops will now be able to offer flexible access in line with the UK’s pension freedoms, introduced in April 2015.
Currently, only Malta-based Rops offer the same unrestricted access to savings that British pensions enjoy, while Gibraltar and Isle of Man-based Rops must satisfy the 70% rule.
Gibraltar impact
Bethell Codrington, global head of international pensions at TMF Group, a Malta-headquartered pension specialist, also agrees that Gibraltar will need to look at updating existing legislation to ensure its Rops comply with the new HMRC criteria.
He believes this is less of a issue for the Isle of Man.
“The effect on the Rops industry will be that jurisdictions that currently do not regulate pension providers or where the provision of pensions is not a regulated activity risk being de-listed. This is not an issue for Malta or Isle of Man, but may prove to be a problem for Gibraltar.
“I am sure that the Gibraltar Financial Services Commission (FSC) will look at changing the legislation there to bring pensions into the regulated environment.
“HMRC did issue guidance in previous announcements to preclude jurisdictions who subsequently changed their domestic rules to try and comply from being accepted, although it seems not to have actually imposed this,” he told IA.
Meanwhile, John Batty of Isle of Man-based Boal & Co, an actuarial consultancy firm specialising in international pension schemes, said the Isle of Man has been regulating pension schemes and administrators since 2000, so “already meets the requirements of the proposed new Rops regulations.”
Closer eye on Rops
Codrington added that a key concern, shared by Momentum’s Stewart Davies, is how the upcoming legislation will be interpreted and enacted by HMRC and the various jurisdictions.
