In particular, passages contained in what is described as an “explanatory memorandum” to a new amendment to existing HMRC pension scheme regulations, intended to address “certain types of pension schemes established in Guernsey”, caught the attention of a number of pension industry executives.
Some questioned why the clarification had not been issued months ago.
As reported, HMRC has released a statement explaining the thinking behind its unexpected decision last month to remove all but three out of 313 Guernsey QROPS from its udated list of registered schemes, which was published on 12 April.
HMRC’s statement came in the form of an amendment to existing regulations for overseas pension schemes, which effectively declares that pension schemes established in Guernsey under the island’s new S157E regime could not be used for the pensions of non-Guernsey residents.
Stephen Ward, managing director of Spain-based QROPS specialist Premier Pension Solutions, said he believed that the explanatory memorandum could potentially represent “a shift in policy” on the part of the UK Government, which he believes is desperate to shut off what HMRC is said to view as a pipeline that is pumping hundreds of millions of pounds of un-taxed pension contributions abroad.
Of potential significance for the future of the pension transfer industry, several people told International Adviser, is a reference in the memorandum to QROPS as having been intended “to allow portability of pension savings for migrant workers”, as it is generally acknowledged that the cost of transferring a UK pension abroad can make it pointless unless the pension is of sufficient size.
“This is the first time we’ve seen a reference to QROPS being for ‘migrant workers’,” Ward said.
“It implies that QROPS are designed to enable a Pakistani nurse, who goes to work in the UK for a few years and then returns home, to transfer her UK pension back to Islamabad.
“If this is indeed the purpose of QROPS, then I really do wonder where this is all heading.”
Noting that the average transfer value of pensions to Guernsey has reportedly been running at more than £250,000, with some of the largest transfer values tending to come from traditionally under-funded and un-funded public sector schemes, Ward added: “In the Government’s view, this is Government money being transferred overseas, which in the currently constrained environment, it can ill afford to lose.”
‘Not just for migrants’
Not everyone in the pensions industry shares Ward’s view of the significance of the reference to migrant workers. One QROPS provider, who requested anonymity, in view of the currently charged atmosphere surrounding UK pension transfers, said he believed it was "wrong…to seize on this ‘migrant workers’ [element] and take it in isolation".
"A ‘migrant workers’ restriction is not at all consistent with previous statements from HMRC, whose own information leaflet on QROPS [have] made it plain that even UK residents can be members of QROPS. [HMRC’s] 2012 FAQs also refer to the tax position of UK-resident members being unchanged.
"So QROPS were created for migrant workers, and that is where and how they are marketed, ie, this is the QROPS market. But strictly speaking they are not restricted to such workers. And QROPS for migrant workers is nothing new."
Instead, he went on, "what HMRC clearly seem to be saying is that they will not accept as QROPS any schemes approved under newly created ‘TEE’ [taxed contributions, with earnings and benefits exempt from tax] legislation specially designed for QROPS transfers. That is now offensive to them.
"The new vision for the future is clearly EET, that is, [contributions and earnings tax exempt, with] benefits taxed ."
Geraint Davies, managing director of Montfort International, said HMRC had “simply clarified common sense” in its recent statements.
“Clearly there was a lack of common sense since 6 April 2006,” noted Davies, who manages an advisory firm specialising in advising individuals planning to move abroad permanently from the UK, particularly those relocating or returning to Australia and New Zealand.
QROPS, he added, “have always been meant for people who are moving overseas for good. People retiring to Spain and Australia are, in fact, migrants."