The Pru is well known in the life insurance industry for placing a greater emphasis on products designed to help people plan for their retirement than many of its rivals. This, some observers suggest, may be behind the apparent interest of its Dublin-based, cross-border investment products arm in the international pensions market.
Ireland currently has some 693 schemes listed on HM Revenue & Customs’ official list of qualifying recognised overseas pension schemes – one of the largest number of such schemes attributable to any single country.
However, these schemes are intended mainly for Irish residents, as the way Ireland taxes the pension income of non-residents is not – for now at least – competitive for non-resident QROPS with such other jurisdictions as Malta and Gibraltar, according to pension industry experts.
If the tax treatment of such schemes were changed, such experts add – which Prudential says the Irish authorities have indicated they are willing to consider – Ireland could potentially become a major force in the so-called “third-country” QROPS market, given its European Union membership and its large, well-educated and English-speaking workforce.
‘For Pru bonds’
Pru International is not looking to enter the pensions administration business itself, according to the company’s international sales director, Andrew Wallace.
Rather, he said, the cross-border investment products arm of Prudential Plc is mulling the idea of working with an existing Irish QROP scheme administrator, in order to provide a bespoke scheme for pension plan holders who opt to park their savings in one of the Pru’s offshore bonds.
As envisioned by Wallace and his Pru associates, the Irish scheme would not bear the Prudential name, but individuals who do not hold their investments in a Pru bond would not be accepted as scheme members.
Wallace unveiled Prudential International’s plans at an industry event last month in London, where, he said, he sought feedback from advisers.
Opinion-gathering stage
“We are at the stage now where we want to gather as many opinions from the adviser market as we possibly can, to make sure that we don’t continue working on something that isn’t going to be of interest to them,” he said.
The plan is to make a final decision later this year, “sometime in the second or third quarter”, by which time Wallace said Prudential expected to have a clear idea of whether the QROPS for non-residents in Ireland made sense.
Prudential’s interest in promoting Ireland as a QROPS jurisdiction came after HMRC stunned the global international pensions industry last April by unexpectedly “de-listing” hundreds of QROP schemes, including 310 out of Guernsey’s 313 schemes.
Before this, “we would have said that the international QROPS market for non-residents was pretty well supplied,” Wallace said, explaining Prudential’s interest in the sector.
“But we think the withdrawal of most of the Guernsey QROPS from the non-resident QROPS market has thrown it out of balance, and there’s a lot less competition now.”
In HMRC data obtained by Guernsey-based Concept Group in 2011, Guernsey ranked third, behind Australia and New Zealand, in terms of the percentage of total pensions transferred to it between 2007, the first year for which the Revenue began collecting data on QROPS transfers, and June 2011. In the first half of 2011, Guernsey accounted for the largest percentage of pensions being transferred, with almost a third of the total number of schemes.
Prudential International executives say that preliminary talks with the Irish tax authorities in recent weeks have revealed a potential willingness to change the way pensions domiciled in Ireland for non-residents are taxed, in a way similar to the that used by such jurisdictions as Malta and Gibraltar.
Feedback
Thus far, Wallace said, the feedback from advisers and others who might be interested in an Irish QROP scheme has been generally favourable, with no major impediments flagged up.
“The Irish rules are quite different from the rules in other jurisdictions, which gives rise to a lot of discussions, but thus far no one has identified any major problems.”
Among its other advantages as a potential QROPS jurisdiction, Ireland – like Malta – has a large number of double tax agreements in force (64, in Ireland’s case, to Malta’s 59). In addition, owing to its major asset management and cross border life insurance industries, it also already has significant experience, and numerous providers, in the cross-border financial services sector.
