In order for certain types of scheme to take advantage of the new flexibility from next April, specifically those qualifying under so-called the “Test two” rule, an amendment was needed to the ROPS definition.
Currently, schemes qualifying as a recognised overseas pension scheme on that basis are required to ensure 70% of the pension assets are used for income. Without this requirement removed from the definition, those using the schemes will be stuck with the status quo.
If the government does intend to amend the rule, it will now have to use a further statutory instrument to make the appropriate changes.
Mark Sanderson, chief operating officer of pensions specialist Brooklands, said: “QROPS will still have their place, although at the moment it doesn’t look like there is an intention to extend the flexibility to Test two schemes.
“However, this is essentially the Treasury’s Bill and so it may be that HM Revenue & Customs may look to address this issue further on. With this in mind, the QROPS industry should begin discussions with HMRC to see if this can be addressed.”
Advice gap
There is also a slightly worrying development on the advice front for clients outside of the UK. Within the Pension Schemes Bill 2014-15, which was also debated and passed through the House of Commons this week, there is stipulation that anyone intending to transfer from a defined benefit to a defined contribution scheme, or into a scheme with “flexible benefits” under which QROPS falls, must have received “appropriate independent advice”.
The definition of appropriate advice has not been made entirely clear in the legislation. However Steve Webb, minister of state for work and pensions, said, when asked by another MP to clarify “what constitutes appropriate independent advice”, that the Financial Conduct Authority would clarify this “in due course”.
This response and Webb’s reply to a later question over the responsibility of trustees in which he said “[Trustees] have to make sure that […] the member has accessed independent financial advice by a regulated IFA or similar”, suggests the IFA will have to be regulated by the FCA.
If this is the case, then clients living abroad will struggle to source appropriate advice and therefore transfer their pension assets.
