The section in question deals with what are now known as QROPS (Qualifying Recognised Overseas Pension Schemes).
The fundamental change in the legislation is that HMRC now provides a list of schemes that it is prepared to register as QROPS, which gives scheme administrators a streamlined process in transferring.
If an overseas pension scheme/fund has a QROPS number and is on the list, UK pensions may transfer to it without attracting an "unauthorised payment charge".
Caveat emptor
However, there is an important caveat, in that HMRC has changed the terminology in relation to what it means to be "qualifying".
The original list published by HMRC had the following heading: "This is a list of Qualifying Recognised Overseas Pension Schemes (QROPS) that have consented to have their details published – not all QROPS will necessarily feature within it. It is not to be taken as a recommendation for a particular scheme or product."
This gave the impression, together with the letters issued to the individual schemes, which stated that: "I am pleased to accept that the scheme is a QROPS with effect from ……" that HMRC had actually individually approved schemes.
HMRC backtrack
It would appear that HMRC has had second thoughts and has dramatically changed its wording, which now reads: "… Publication on the list should not be seen as confirmation by HMRC that it has verified all the information supplied by the scheme in its application. If the scheme has been included on this published list in circumstances where it should not have been included because it did not satisfy the conditions to be a QROPS, any transfer that has been made to that scheme, could potentially give rise to an unauthorised payments charge liability for the member (RPSM14102020)"
What this means is that HMRC may at any time remove a scheme from the QROPS list at its discretion.
Jurisdictional risk
The risk, therefore, is in members transferring to schemes in jurisdictions that have lax pensions legislation, and which have abused or been seen to abuse the spirit of the regulations, even if not the actual regulations themselves.
They might find themselves caught up in un-authorised payment charges, due to the actions of their trustees who have not followed the legislation in conducting investments or distributions etc, for themselves or other members of that scheme. A number of overseas/offshore jurisdictions have comparatively lax domestic rules regarding the management of International Pension Schemes, which may lay them open to retrospective action by HMRC.
The Maltese option
Malta has a unique advantage in the QROPS market, in that it has no legacy business, and its pension legislation is based on the domestic UK model and was only passed last year.
The Malta Financial Services Authority (MFSA), requires companies who wish to transact pension business not only to apply for a Pensions Administration Licence, demonstrating their ability to administer pension schemes, but also each and every individual scheme has to be individually approved and regulated. This makes Malta one of the most comprehensively regulated QROPS providers.
Malta therefore offers potential members the important comfort factor, of not only being an EU member state (not a "tax haven"), but also a very strict detailed regulatory system.
