The offshore pension industry is trying desperately to figure out the mystery of why Cyprus is missing from the official HM Revenue & Customs list of qualifying recognised overseas pensions (QROPS).
HMRC publishes a list of providers self-certifying their pensions compliant with QROPS pension rules in the UK – the list includes more than 2,000 schemes offered in 48 countries.
The list published for August 10, 2012, omits Cyprus, which has offered QROPS since the offshore pension regime started in April 2006.
Retirement savers and international financial advisers have no idea of why the island’s five QROPS schemes missing. Rumours
Neither HMRC, which manages international QROPS compliance, or any of the providers, has made any comment about what has happened
One of the QROPS is for staff of multinational financial consultancy PricewaterhouseCoopers.
Why QROPS are delisted
UK pensions fund managers cannot transfer money to a QROPS unless the trustees have self-certified their scheme is compliant with HMRC. When certification is completed, HMRC places the scheme on the QROPS list.
Removal from the QROPS list is generally for one of three reasons:
- The provider asked for removal or confidentiality about their scheme
- The QROPS has closed
- HMRC removed the QROPS – and in the past this has only happened when the scheme has failed to comply with QROPS rules
Some industry experts are speculating the Cyprus removal may lie with the country having no pensions regulator.
For Cyprus QROPS investors, the risk is that HMRC has removed the schemes for flouting the rules, which would could see them facing fines of at least 55% of the transfer value of any pension fund in to the scheme.
QROPS winners and losers
Cyprus is the second offshore financial centre to lose QROPS status, although hundreds of individual schemes have been removed from the listing by HMRC.
Singapore was struck off in 2008, and despite a legal challenge, the courts have backed HMRC, but the case is still open with some investors ready to appeal the decisions.
In April 2012, almost 400 QROPS were closed to new business because the UK government rewrote the rules for offshore providers.
Over 300 of these pensions were based in Guernsey, which closed as a QROPS centre. Guernsey QROPS providers can only administer pre-April 2012 schemes or take in transfers from residents.
Jersey and Qatar’s financial district have backed away from launching QROPS schemes since the rule change, while Gibraltar has passed new pension laws aiming to become QROPS compliant.
Penalties for delisted QROPS
Many other QROPS were closed in the Isle of Man and New Zealand at the same time as Guernsey schemes were delisted.
HMRC has announced investors in these schemes would not face tax penalties because of the rule changes.
QROPS were delisted in Guernsey, the Isle of Man and New Zealand because each country offered different income tax rates on pension payments to residents and non-residents.