The UK government recently announced that, from 2028, people will have to wait until they turn 57 to access their private pension.
Under current pension freedoms rules, savers are able to tap into their retirement pots from 55.
The age increase was first announced in 2014, with pension freedoms introduced a year later.
While it may seem a long time off, there are some considerable changes that will need to happen before 2028 – not least ensuring that pension schemes comply with the updated age limit.
One key area HM Revenue & Customs (HMRC) will likely need to monitor closely is qualifying recognised overseas pension schemes (Qrops).
Loopholes that allowed some receiving schemes, namely in places like Australia and Canada, to grant access to retirement pots before the age of 55 saw swathes of recognised overseas pension schemes (Rops) removed from HMRC’s list in 2015 and 2016.
It is unlikely that the taxman will want a repeat of that situation in eight years’ time.
International compliance
David White, managing director at QB Partners, told International Adviser: “Most of the changes that HMRC have made to the Qrops rules over the years have been with a view to bringing the Qrops rules in line with UK-registered pension rules.
“If the UK registered pension rules change to a minimum retirement age of 57, then it is likely that Qrops will follow and the pension age test will be changed to 57.
“This likelihood is increased when pension freedoms are considered. One of the reasons that HMRC introduced the pension age test was to avoid individuals transferring into jurisdictions which would allow them to access flexible drawdown from an earlier age than they could in the UK.”
‘Plenty of time’
But White believes that the 2028 deadline will give HMRC enough time to have overseas pensions schemes comply with the age increase.
He continued: “In 2015, the pension age test led to a number of schemes and even jurisdictions being temporarily removed from the HMRC Qrops list.
“On this occasion, if the pension age test is changed to age 57, removal of schemes from the HMRC list is much less likely to happen.
“The minimum retirement age is not being introduced until 2028, which gives plenty of time for HMRC to warn Qrops jurisdictions of the forthcoming change and for the Qrops trustees to act.
“The most likely outcome is that the Qrops rules will be changed to state that any part of the pension scheme which arises from a transfer from a UK registered pension scheme should be ringfenced and will not be able to be used to pay benefits until after age 57,” White added.
