Qrops charge ‘inadequately consulted’ but good for Malta

The UK government’s unexpected decision to impose a 25% charge on some overseas pension transfers “lacked adequate consultation” but is positive for Malta and the wider pension industry, said the Malta Association of Retirement Scheme Practitioners (MARSP)

UK chancellor Philip Hammond unveiled the charge, which took effect on 9 March, in the Spring Budget on Wednesday.

The announcement took many in the industry by surprise, with some suggesting that the move could effectively shut down the qualifying recognised overseas pension scheme (Qrops) market.

There are exceptions, such as when the individuals and the pension are both located within the European Economic Area, but transfers from outside the economic area are expected to be hit hard.

Despite criticising the UK government for not consulting with industry before firing the starting pistol, MARSP believes that the move is positive for Malta and the wider pensions industry, especially in Europe.

The Maltese association said the tax charge should “discourage the transfer of smaller pension pots and help prevent pension fraud”.

“In addition, the new tax will make transferring expats think twice about the cost implications of such a move and seek assistance for reputable, regulated IFAs, experienced in this complex area.”

The decision shows HM Revenue & Customs and the UK government is serious about ensuring UK tax-relieved pensions money is used properly for the purposes of retirement, MARSP said.

The Maltese retirement association believes that the tax charge could be part of the UK government’s pre-Brexit positioning around the portability of pensions.

The move could be an attempt to ensure that UK pension funds are still portable in Europe, even after the UK leaves the European Union, the association added.