HMRC are currently in consultation on QROPS tax status, and based on the Government’s previous “Freedom and Choice” consultation it is predicted that the change to QROPS rules will also be introduced in April 2015.
As things currently stand, any lump sum withdrawals from the overseas schemes which exceed the lump sum rate in the UK are subject to the same penalty charges. This equates to 55%.
Now with the reduction in tax charges and the potential for 100% lump sum withdrawal being introduced as of next year, QROPS – which have recently surged in popularity because of the public sector pension restrictions due to start in April – will receive an extra boost. Originally there were fears in some circles that the future of QROPS could be under threat if the introduction of UK flexibilities in certain areas were not replicated.
With the HMRC confirmation of its ongoing consultation, QROPS holders can look forward to even more freedom within their scheme. It hasn’t always been the case, and much like any financial product, there were teething problems initially as the rules were both unclear and constantly amended by HM Revenue & Customs.
Level Playing Field
Some jurisdictions – and schemes based in them – struggled to stay within the rules and were excluded during the first three or four years of the scheme being introduced in 2006. Now, however, the field has levelled out considerably as the rules seem set in stone generally, and the advice given on these products is based on experience rather than learning as-you-go.
Because of the current plight of pensions from various sectors in the UK, expatriates are continuing to look at the best way to get the most from their accrued savings. For most, the decision seems to lie away from the UK and its deficit-laden fund.
A QROPS is by no means the only option available, and in some cases it may not be the best option. For those looking for flexibility, early retirement, and for those that simply want the security in knowing that their funds are not being stored in a pension pot in deficit, a QROPS certainly ticks all the boxes.