As some observers feared it might, HM Revenue & Customs has taken an axe to the remaining 52 Canadian ROP schemes on its list, removing all but three.
The three remaining schemes, all of which are BMO (Bank of Montreal) entities, were left standing in the latest list, published today on the HMRC website.
Asked about the loss of the 49 schemes, an HMRC spokesperson said: “We don’t comment on identifiable jurisdictions.”
As reported here earlier this month, the number of ROPS – which used to be known as Qualifying Recognised Overseas Pension Schemes – on the online ROPS list has been falling steadily for months. In July there were 68 schemes on the list.
No explanation has ever been given for the steady drop in the numbers. Neither HMRC, which oversees the pension transfer industry, nor any of the companies which have closed down their schemes have disclosed the reasons to International Investment.
However, Geraint Davies, managing director of Montfort International, a Guildford, Surrey-based firm which specialises in helping Britons and others with UK pensions to transfer them to such countries as Australia and New Zealand as well as Canada, has been saying for months that he believed 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 last year, is no longer permitted.
Today he told International Investment: “Our concerns appear to have been well founded – why would HMRC extinguish virtually the entire Canadian QROPS market today, unless Canadian schemes were not meeting HMRC conditions?”
He added: “We will be asking Canadian residents what they will now be doing to seek peace of mind from the scheme that received the pension transfer from the UK registered pension scheme. Were these schemes ever QROPS? Many questions need answering, including what UK advisers have been doing in terms of due diligence on behalf of those clients whose pensions they have transferred into Canadian schemes.”
As in the past, Davies urged the tax authority and the Financial Conduct Authority to examine the overseas pension transfer market, where, he has long been arguing, QROPS are being sold as a product, rather than the ‘concept’ they really are, without sufficient due diligence”.
The three schemes that are remaining on the ROPS list are: BMO Nesbitt Burns RSP 527-010; BMO Private Banking Retirement Savings Plan; and BMO Retirement Savings Plan (ADVISOR).
News of the removal of the 49 ROPS from HMRC’s list came at the same time that the UK’s pensions minister and the Financial Conduct Authority announced a 1% cap on early exit charges for occupational pensions in the UK, in order to bring exit charges for workplace pensions in line with other personal and stakeholder pensions, under the government’s recent pension reforms legislation. Previously there was a 5% charge on such early withdrawals.
Enforcement of ‘Pension Age Test’
According to Davies and other pension transfer specialists who have expressed concern over the unexplained disappearance of Canadian ROPS from the HMRC list, the problem is that under Canadian law, Canadians, unlike Britons, are able to take their pensions before the age of 55 without a problem. But Canadian pension fund administrators who maintain ROP schemes have asserted that they are able to meet the UK’s age requirements by introducing their own in-house rules prohibiting such pre-age 55 pay-outs.
However, neither the Canadian authorities nor HMRC have ever provided ROPS providers with specific guidance on this matter, Davies and others say.
1,653 schemes removed
It was last April when HMRC stunned the UK and international pensions transfer industry by ruling that that all but one Australian scheme failed to meet the new ‘Pension Age’ standard. Before this particular day, 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 last year moved quickly to implement the new standard, which resulted in the de-listing of those 1,653 Australian schemes.
Under the new regulations, anyone who is found to have moved their pension to a scheme that would permit someone to access their pension funds before their 55th birthday, directly or indirectly, now faces a significant penalty, known as an “un-authorised payment charge”, levied against them by HM Revenue & Customs.
This is the case, pension industry experts point out, even if they themselves never actually attempt to access their pension early, or indeed, in theory, even if no one does – all that matters is that it is theoretically possible.