Amendment to QROPS rules - March 2015
News broke on Tuesday 17 March of further changes to QROPS regulations in the form of The Overseas Pensions (Misc Amendments) Regulations 2015 (SI 673-2015). These rules have confirmed the changes to the QROPS regulations which come into effect from 6 April 2015.
There is one major change to the draft regulations which were issued in December last year. In that draft, HMRC had confirmed that the requirement to use 70% of the fund to provide an income for life would be removed, which would have brought QROPS into line with UK pensions freedom post 6 April 2015. In the latest version of the regulations, HMRC have stated that the 70% rule (also known as the 70/30 rule) will stay in place temporarily and that for the time being schemes will still be required to use 70% of the fund to provide an income for life and pay a maximum of 30% as a lump sum.
The explanatory note accompanying the statement states that the 70% rule would be kept as a "temporary measure so that the legislation to replace the 70% rule can be targeted more precisely to ensure that the principles behind allowing transfer to be made free of UK tax can continue to operate as Parliament intended."
The QROPS Bureau's view is that HMRC have made this change to avoid QROPS being used purely to access lump sum payments tax free or in a very tax efficient manner.
There have been a number of interpretations in the press about how these rules may differently impact EU and non EU schemes, however we believe that any conjecture prior to HMRC issuing full clarification is not sensible.
As was expected, the regulations have confirmed that the minimum retirement age for a QROPS has been changed to 55 to bring QROPS into line with UK pension rules.
Please open the attached PDF for a downloadable version of this note.