There is much to consider when looking at retiring abroad. Top of the list is often climate, proximity to loved ones and the availability of a cup of tea, but for those of retirement age, the quality of Qualifying Registered Overseas Pension Schemes (QROPS) is one of the main concerns.
As such, if a country has a poor reputation when it comes to QROPS, or isn’t one of the 50 countries that are part of the scheme, it can severely affect their immigration rate and, consequently, their economy. With this in mind, Gibraltar has become the latest in a string of countries to introduce a QROPS Code of Conduct.
What are QROPS?
You may already have heard of QROPS under the informal name of ‘offshore pensions’ due to the simple fact that the schemes operate outside of the boundaries of the UK. If you are a UK Citizen, with UK pension rights then you should qualify for QROPS if you plan to permanently live abroad.
There are roughly 2,000 schemes spread throughout the world and although they are all based on the same general taxation template, local laws and financial regulations in each country mean the attractiveness of each scheme varies wildly.
What are the benefits?
Aside from the generosity of some of the aforementioned local taxation laws, the flexibility involved in withdrawing your lump sum entices many. After all, if you are living abroad, you never know when funds will be needed. Whereas more traditional UK based pension schemes cap your lump sum limit to 25%, some QROPS will allow up to 70% to be withdrawn. This puts the power directly with the consumer.
Back in May, UK Money Market released a piece extolling the virtue of QROPS in Malta (Malta, Cream of the QROPS by the wonderful Paul Forrest) as the Maltese offered the lowest cost QROPS across all 50 eligible countries. While the schemes available in Malta are no doubt excellent, it is certainly now time to consider Gibraltar.
The temptation to write that QROPS in Gibraltar were ‘steady as a rock’ was almost too much to resist but that dreadful pun would have come as a surprise to many given the island’s ‘rocky’ (sorry!) history when it comes to the schemes. Poor providers, unclear and inconsistent rules and reports of bad experiences gave Gibraltar a reputation that they were keen to shed.
In fact, so keen were the Gibraltar Association of Pension Fund Administrators (GAPFA) to change Britain’s view that a mandatory code of conduct was released in Autumn 2012 for any operator who had plans to offer QROPS.
What’s in the Code of Conduct?
As reported by QROPS Investor in early 2012, HMRC have cracked down on anybody that they feel has cheated taxation rules (whether intentionally or not). This almost certainly led to the Code of Conduct in Gibraltar.
“The code stresses providers must ensure they have adequate resources to manage, control, direct and organise the business,” says Chris Wright of QROPS Investor, “including having sufficient appropriately trained staff, as well as operational manuals to ensure proper compliance and to satisfy Gibraltar’s Financial Services Commission (FSC) requirements on procedures and methodology.”
In short, the code protects investors from companies that are not on sound financial footing (therefore protecting their investment) and ensures that all organisations offering QROPS operate at a high standard.
While none of this sounds revolutionary, it is an enormous step forward from Gibraltar. On a larger scale, the code will also make sure that a fee structure is followed and will also prevent QROPS being used as a front for money laundering.
So while it’s certainly possible that Malta is still ‘cream of the QROPS’, it’s arguable that Gibraltar is now ‘top of the QROPS’.