In the Autumn statement document, published following the chancellor Philip Hammond’s speech on Wednesday, the UK Treasury set out plans that will see income from foreign pensions, the bulk of which consist of Rops, treated the same as income from UK pensions.
“The tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones,” said the document.
The department said it will also extend from five to 10 years the taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief and align the tax treatment of funds transferred between registered pension schemes.
In addition, HM Revenue & Customs will “update the eligibility criteria” for Rops to qualify as overseas pensions schemes.
Details of the reforms will be announced in the Finance Bill on 5 December.
Rops eligibility
John Batty of Isle of Man-based Boal & Co, an actuarial consultancy firm specialising in international pension schemes, said the UK could look to harmonise access to Rops registered in EU and non-EU jurisdictions.
At present, only Malta-based Rops allow flex-access in line with the UK pensions freedoms, while Gibraltar and Guernsey Rops restrict access until the age of 55.
“As always the devil will be in the detail, but it will be interesting to see if the rules for non EU schemes are brought into line with EU schemes, or whether the reporting or tax arrangements change,” Batty told International Adviser.
Batty added that eligibility criteria could also be tweaked to allow more schemes from Australia – the world’s largest Rops market – to be allowed back on to the HMRC list after last year’s mass cull.
A contentious area, the UK’s ‘pension age test’, introduced in April 2015 as part of the pension freedoms, has already seen thousands of Australian and Canadian schemes removed from the HMRC’s pre-approved list.
Both Australian and Canadian Rops were removed for failing to meet the conditions of the test, which 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 primarily ‘registered retirement savings plans’ can be cashed in partly or fully at any time, regardless of age, while Australia allows for access in cases of serious financial hardship.
However, Rachael Griffin, head of product law and financial planning at Old Mutual, reveals changes to the eligibility of foreign schemes could see more Rops losing their approved HMRC status.
