QROPS and other offshore pension rules are about to change again with some housekeeping updates announced by HM Revenue and Customs.
The aim is to bring offshore pensions that include tax-relieved contributions from the UK in to line with onshore pensions to remove any tax advantages for non-residents.
The Finance Act 2011 stripped away restrictions on lump sum and drawdown payments along with the obligation to buy an annuity.
A key change was new legislation that gives an option for flexible drawdown of unlimited sums from their pension fund – providing they can prove they have a secured personal pension income of £20,000.
This figure is set to stop anyone with a pension from drawing and spending all their retirement savings and then claiming state benefits.
These rules applied to UK pension schemes, but not registered overseas schemes like QROPS.
This changes when the Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) (Amendment) Regulations 2012 come in to force.
The regulations change tax rules for offshore pensions to make sure funds that have benefitted from tax relief in the UK meet European Union laws.
The overall result is payments from a QROPS or other offshore pension picks up similar tax treatment to any onshore UK scheme.
The new rules are backdated until April 6, 2011, so apply to the tax year that ended on April 5, 2012.
HMRC reckons the change does not affect any individual’s tax liability.
The changes are in line with other recent QROPS rule changes aimed at aligning the tax benefits of offshore pensions that have received tax relieved contributions from a UK fund.
Chancellor George Osborne stated in Budget 2012 that he would enact retrospective anti-avoidance rules to plug loopholes exploited by retirement savers trying to avoid tax with offshore pensions.
Contact one of our expert QROPS advisers today to find out more information