The jurisdiction’s new pension regulations, announced on Friday, followed “discussions with the UK authorities” in which it was decided not to introduce flexible access for Gibraltar Qrops.
“Gibraltar will keep its current arrangements that require members of Qrops schemes to retain 70% of their total funds to provide a pension income for life. The rate of tax on pension benefits taken from these retained funds will continue to be levied at the current rate of 2.5%,” the government stated.
Albert Isola, Gibraltar government’s minister of commerce said the introduction of the personal pension regulations “will ensure that Gibraltar retains the highest standards of pension regulation and maintains its status as a ‘recognised’ jurisdiction for Qrops”.
He added that government had worked closely with both Gibraltar’s financial services regulator, the GFSC, and the local pensions sector, GAPFA, to ensure Gibraltar’s new pension regulations were in place prior to the changes that will be introduced on 6 April 2017.
There were industry concerns that Gibraltar was in danger of losing its Qrops status as the deadline approached.
The regulations cover three main areas:
- a new controlled activity of establishing, operating or winding up personal pension schemes;
- a new controlled activity of advising on pensions (personal and occupational);
- approval of personal pension schemes.
In early reaction, Brendan Harper, head of technical services, Friends Provident International, said: “This is an interesting development.
“This announcement is a positive step to ensure that pension schemes based in Gibraltar continue to qualify as Qrops following imminent changes in UK law that require overseas personal pension schemes to pass a more stringent “regulation” test.
“Whilst I can only speculate at the moment, the retention of the “70/30” rule in Gibraltar appears to be condition for the UK to treat Gibraltar as an EEA state for the purposes of one of the exemptions from the proposed transfer tax in respect of certain overseas pension transfers.”
David White, partner of The Qrops Bureau said: “It is surprising that Gibraltar has decided not to introduce flexible access and I think the market had interpreted the Finance Bill 2017 as requiring pensions schemes to allow flexible drawdown to meet the Qrops conditions.
“What the rules actually say is that the 70% rule (ie that 70% of a pension fund must be used to provide an income for life) will be removed from the conditions that a pension scheme has to meet to be an ‘overseas pension scheme’ or a ‘recognised overseas pension scheme’.
“The rules don’t say that a scheme can’t be a Qrops if it keeps the 70/30 rule in place.”
He added that the Gibraltar authorities have agreed this with the UK authorities, presumably HMRC, so “this would reinforce the fact that it should not be a problem”.
White added that although the perception in the market may be that keeping the 70/30 rule places Gibraltar at a disadvantage to other jurisdictions such as Malta (and indeed the UK) another view might be that the introduction of flexible drawdown in the UK was motivated by politics and the need to raise tax revenue.
This argument suggests that flexible drawdown “partly contributed to some problems such as pension scams and the need for the introduction of the defined benefit advice requirements, which have proved enormously complex”.
“The 70/30 rule is consistent with ensuring that a pension is used to provide an income for life in retirement, which is what they are intended for. I think the Gibraltar government and the marketing departments of the Gibraltar pension schemes will be able to use this as a selling point.”