However, the company says it is taking steps to liaise with reputable firms that specialise in QROPS to ensure that Sesame network members who require information and help with these specialist overseas pension products will be able to receive it.
Until now, Sesame said, it has never specifically permitted its advisers to advise on and arrange QROPS schemes for their clients, but it felt that the time had come to clarify its stance on the matter.
Potential blow
A ban on advising on QROPS by such a major organisation could be a serious blow to the image of qualifying recognised overseas pension schemes. One expert in the offshore arena said, though, that Sesame might be taking a sensible precaution, given the size of its sales force, the mainstream market in which it operates, and the specialist, niche nature of QROPS, which demands a high level of expertise on the part of advisers who handle them.
Indeed, in a communication to its advisers formally notifying them of the ban on the advising on QROPS, Sesame cites the fact that “QROPS are spread across a large number of countries, all with their own local laws and tax systems”, thus making “a thorough understanding of how such a transfer will be treated from a tax perspective” in a given country necessary – “and these rules vary widely”.
It also observes: “We do not envisage that this formal prohibition will be of significant detriment to firms, given what we know about likely business levels.”
‘Substantial degree of uncertainty’
Although the HM Revenue & Customs rules governing QROPS came into force back in 2006, Sesame’s experts believe there is “still a substantial degree of uncertainty surrounding them, not least because of how some of the schemes are marketed”, the communication to Sesame’s advisory team reveals.
“Many are marketed as a way of pension-busting, i.e., enabling the client to obtain full benefits as a tax-free lump sum after requiring reporting periods have ended, or otherwise obtain the benefits outside of HMRC’s QROPS requirements,” the communication to the Sesame advisers points out.
It notes that HMRC has shown that it is of the view “that it is not its [HMRC’s] responsibility to ensure that schemes meet its requirements, although it has offered leniency” to individuals who invested “in good faith” in what later have turned out to have been problem schemes.
What is more, recent cases have shown that HMRC is prepared to remove the recognised status of QROPS schemes that have featured on its list and if it wishes, apply punitive tax charges to individuals, the Sesame letter points out.
“So, even where a recommendation is made in good faith, for genuine ‘retirement income’ reasons, and wehre the transfer appears to be suitable, there can be no certainty that an unauthorised payment charge (of at least 40%) will not be applied retrospectively at some point in the future.
“Also, this could be through no fault of the client’s. If the overseas scheme does not continue to comply with the reporting requirements, then HMRC could withdraw its status and the punitive tax charge could apply.”
Sesame is a part of the Dorking, England-based Sesame Bankhall Group, which was created in 2009 when Sesame acquired Bankhall and Premier Mortgage Services, two other companies in related advisory sectors.
