In the wake of UK Chancellor Phil Hammond’s surprise budget announcement on 8 March that a new 25% charge is to be introduced on pensions moved overseas, HM Revenue & Customs has quietly posted a new introduction to its online list of such schemes, warning that the list will “be suspended” as of 14 April, and a revised list published four days later.
“At that time please check the list to ensure you’re transferring to a scheme that appears on the revised list,” the new introduction to the online list of registered overseas pension schemes adds.
News of the new introduction to the list prompted some in the industry to suggest pension transfers be suspended until 18 April, or else carried out with extreme care, to ensure there would be no chance of unhappy, and costly, outcomes.
The official HMRC ROPS list, which names the schemes that accept UK pension transfers on a country-by-country basis, has long been a central reference point for pension transfer industry practitioners, and is closely watched by many of them for its twice-monthly updates.
The new introduction to the HMRC ROPS list, which can be viewed here, notes that “from 6 April, 2017, the requirements to be a ROPS are changing. You’ll need to check that the scheme you’re transferring to on or after that date meets the new requirements.
“HM Revenue & Customs can’t guarantee these are ROPS, or that any transfers to them will be free of UK tax. It’s your responsibility to find out if you have to pay tax on any transfer of pension savings.”
It goes on to point out that HMRC “will usually pursue any UK tax charges (and interest for late payment) arising from transfers to overseas entities that don’t meet the ROPS requirements, even when they appear on this list. This includes where the ROPS requirements have changed, and where taxpayers are overseas.
“HMRC will also charge penalties in appropriate cases.”
The new introduction concludes by reminding its audience that tax relief is given on pensions “to encourage saving to provide benefits in later life”, and that for this reason, those who access their benefits, either directly or indirectly, before age 55 will be liable for UK tax charges “in all but the most exceptional circumstances”.
Clients made ‘aware of changes’
Chris Lean, a Czech Republic-based adviser with Aisa International who has been critical of certain aspects of the UK’s recently-introduced “pensions freedoms” legislation, said it was “now critically important that advisers make their clients aware of the changes in the Budget relating to the [new] 25% Overseas Transfer Charge”.
“Clients need certainty, and the rules relating to a change of circumstances mean that clients also need to provide certainty to their plans that cover the next five years. If this is not made clear at outset, then advisers could leave themselves open to a complaint if the OTC is applied unexpectedly,” he added.
At least one ROPS provider is reaching out to clients with reassurances that it is already prepared for the post-14 April UK pensions landscape. TMF International Pensions, which administers the Melita International Retirement Scheme in Malta, is to write to its adviser clients this week to let them know that it has already submitted its “revised undertaking”, in the form of a so-called APSS240 document to HMRC, which it notes HMRC has said is necessary if schemes are not to “cease to be a (Q)ROPS from 14 April 2017”.
Bethell Codrington, global head of pensions at TMF Group, told International Investment that pension trustees would need to be aware “and take on board” the fact that going forward, when the new Overseas Transfer Charge arises, there would be “joint and several liability of the member and the scheme manager to settle the tax” together.
“No longer is [the tax owed on a pension transfer] the sole liability of the member,” he said.