HM Revenue and Customs (HMRC) is closing the online reporting service for the Qualifying Recognised Overseas Pension Scheme (QROPS) from April – but retirement savers need not worry too much about the change.
Shutting the online service is a technical issue for the people who run QROPS overseas pensions and does not really affect retirement savers.
Although HMRC has not announced why the service is closing, some tax changes impacting overseas pensions are on the way in April 2017, and these could be behind the decision.
QROPS reporting involves providers filing various forms with HMRC relating to the status of the QROPS, members and transfers and payments.
From April, the behind the scenes workings of QROPS will align more closely with those of onshore pensions.
The big changes
The two main changes are:
- Taxing all the benefits paid by a QROPS if the pension saver returns to the UK.
Tax is paid on 90% of benefits currently, but HMRC wants tax on QROPS benefits paid in the UK to match what other retirement savers pay on benefits from their domestic schemes.
- Doubling the payment reporting period from five to 10 years.
Pension providers must tell HMRC about cash and other benefits taken from a QROPS for a decade after an expat has left the UK.
Another worry about the upcoming rule charges for QROPS is hundreds of offshore pensions fall foul of the new pension age test because they allow retirement savers under 55 years old to draw benefits from their pots.
In recent months, several countries have lost QROPS status because they do not pass the test, including Canada, France and Italy.
Pension providers in Australia, the retirement destination with the most QROPS, are locked in negotiations with HMRC over the issue as they fear more than 300 pensions may lose their QROPS status.
A recent pension scam consultation that is now closed also caused some concerns about QROPS transfers.
The consultation included a list of proposed statutory transfer destinations, which are automatically greenlighted to accept money moved out of a UK pension.
QROPS were not included on the list, which could mean transfers will take longer while UK pension providers sought confirmation before transferring pension pots overseas.
The move is aimed at stopping pension scams.