Two weeks after the last three Canadian ROP schemes on HM Revenue & Customs’ official list vanished, the last American ROP scheme has now also disappeared.
The US-ROPS-free list appeared today, as HMRC updated its online list of schemes, as it does every two weeks. And has been the case for months, the updated list is generating comment among those in the business of helping those with British pensions who wish to transfer them outside of the UK to do so.
Until recently, ROPS, or Recognised Overseas Pension Schemes, used to be known as Qualifying Recognised Overseas Pension Schemes, or QROPS, but it is thought that HMRC removed the word “qualifying” in an effort to make clear to consumers that the schemes in question had not been formally authorised by the tax body.
As recently as April 2015, there were 13 US ROP schemes on the HMRC list, including the seven shown below:
The other six from that list were the ABL/Shirley MacKay Solo 401K Pension Plan; the AVM, LP Profit Sharing Plan; Currie & Brown Inc 401(k) Plan & Trust; Fidelity Investments 401K Pension Plan; Graham Rumbellow SEP IRA; and the Hospital & Medical Foundation of Paris, Inc Tax Deferred Annuity Plan.
In a statement, an HMRC spokesperson reiterated the agency’s long-standing policy of declining to comment “on identifiable schemes or jurisdictions”.
He added: “There are a number of reasons why a scheme may no longer be on the list. Further information can be found in the Pensions Tax Manual, here.”
He went on: “The UK has a very generous transfer regime, as tax-free transfers can be made to schemes anywhere in the world provided they meet certain conditions, so that the overseas scheme is similar to a UK-registered pension scheme. The last change to the rules was in April 2015.
“Since then, transfers are tax-free only if, after the transfer, the pension savings cannot be accessed before the taxpayer reaches 55 years old.
“As ever when considering tax reliefs, we look at the law and the specific facts of the case.”
The disappearance of the last recognised overseas pension scheme in the US from HMRC’s list will not come as a surprise to many observers, who have long argued that the US tax regulations have long made such arrangements tricky to structure in a tax-efficient way.
Nevertheless, the removal of the last US ROP scheme means that Americans who have been paying into British pensions while working in the UK are now effectively unable to transfer these pensions to US schemes when they return to their home country.
That said, the last scheme on the list – the Isabelle Je Dunne Contributory IRA – is thought not to have been set up to accommodate the pension transfers of random clients, according to Geraint Davies, managing director of Montfort International, a UK pension transfer specialist, and regular watcher of the HMRC list.
Although he said he wasn’t personally familiar with the scheme, it “looks like an individual plan, like many of the other US schemes that have been on the list in the past and which were removed”, he said.
He added that he and his team at Montfort weren’t surprised to see the last US ROP scheme disappear from HMRC’s list.
“We have always held out that US couldn’t make the HMRC grade to accept UK transfers.”
The question for those who transferred their pensions into such schemes, he added, was whether they might have been looking down the barrel at unauthorised payment charges by HMRC, if there were deemed to have been any “false declarations” in connection with the schemes in the past.
The question for the industry as a whole, meanwhile, “is which country will be next? The US is gone, Canada went last month and France and Italy disappeared last year.
“HMRC appears to be doing the rounds of all the jurisdictions.”
Pension Age Test
As reported, industry sources have said it is understood that the reason the Canadian schemes ceased to be considered acceptable by HMRC for Britons to transfer their pensions into is because the UK authorities were unconvinced that UK pension scheme members who transfer their UK pensions to Canada would not be able to access their pensions before the age of 55 – which, under new rules HMRC brought in in 2015, known as the Pension Age Test, is no longer permitted.
1,653 schemes removed
HMRC first stunned the UK and international pensions transfer industry in April 2015 by ruling that that all but one Australian scheme had failed to meet its new Pension Age standard. Previously, the HMRC list had showed some 1,653 Australian schemes that were prepared to take UK pension transfers.
But then, evidently concerned that some people might be looking to move their pensions to jurisdictions that permitted such early withdrawals on purpose, with the intention of gaining early access to their money, HMRC moved quickly to implement the new standard, which resulted in the de-listing of those 1,653 Australian schemes.
The disappearance of the Canadian ROP schemes was less dramatic, but before the Pension Age Test came in, there had been 68 Canadian schemes listed at one point.
UK advisers first began to sound the alarm over the vanishing Canadian schemes last April.
In mid-November of last year, HMRC’s updated list contained 49 fewer Canadian ROP schemes, and none of the 19 Italian ROPS and 11 French ROPS that had been on the list just two weeks before.
To see the latest official HMRC ROPS list, published this morning on HMRC’s website, click here.
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