The number of Canadian pension schemes featured on HM Revenue & Customs list continues to shrink, with just 52 schemes appearing on the latest list, down nine from a month ago, and 16 from July, when there were 68 schemes.
The 23.5% decline in listed Canadian ROPS in just four months is being seen by some UK pension experts as evidence that something is causing companies to cease to accept pension transfers from British schemes under the Recognised Overseas Pension Scheme system, which was first set up in 2006.
As reported, the issue has been raised previously, but thus far, neither HM Revenue & Customs, which oversees the pension transfer industry, nor companies which have closed down their schemes have disclosed the reasons.
An HMRC spokesperson said today that the tax authority didn’t comment on “identifiable jurisdictions”.
The latest list of schemes, which used to be known as Qualifying Recognised Overseas Pension Schemes, was published on the UK government’s website yesterday, and may be viewed here.
Of the nine schemes that have come off of the list most recently, five were Industrial Alliance Pacific schemes, and three were Manufacturers Life Insurance Company schemes.
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, told International Investment that any UK advisers and pension fund managers that were currently considering transferring schemes to a Canadian ROPS should ensure that they undertake sufficient due diligence, given the current uncertainty.
“The trouble is, many advisers in this sector focus on entering the market [quickly], without the technical resources to check what they are transferring into,” he said.
“We have seen advice generated by so-called UK pension transfer specialists, even for for final salary pension scheme transfers, with little pertinent detail, enabling them to sign off on as many as 50 transfers a week,” he added.
As reported here in April, the concern Davies and a number of other pension transfer experts and advisers have is that the UK authorities may not be satisfied 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 not permitted.
According to Davies and these other pension transfer specialists, the 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 pre-age 55 pay-outs.
Thus far neither the Canadian authorities nor HMRC have provided 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 its new 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 a new “Pension Age Test”, resulting 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.
If you are an adviser whose client has been in a Canadian ROPS scheme that has been closed down by HMRC because it was seen to be in violation of the new Pension Age Test, or if you’re a client who has been affected, please let us know: [email protected].