NEW pension rules – heralding the arrival of the most flexible pension options ever seen in the UK – will apply from April 2015, when ‘total flexibility’ will be the name of the game.
There was some concern that there would be limitations as to how these options might apply to certain final salary pension schemes, but we now know that these restrictions will not apply.
These rules are, however, for UK pension schemes for members who are still resident in the UK. For expats, it would be dangerous to assume that the new rules will automatically apply.
If the pension scheme is still held in the UK the new rules should apply and it is only personal tax issues which need to be considered. You may consider moving from the UK scheme into QROPS, as there are many advantages to be gained in making this change. However, if your plan is to gain access to the new flexibility, then you should not assume that the new rules will automatically extend to your QROPS.
It is fair to say that QROPS have to comply with rules as laid down by HMRC, but for people who have been non-UK tax-resident for less than 5 years, the UK tax rules can still reach them. After that period it is usually the rules from the jurisdiction where the QROPS is administered and the tax rules of your country of residence that will prevail.
However, not all QROPS providers or even jurisdictions will automatically fall into line with the new rules. It will be down to each provider to determine their position and while some have already indicated that they will comply, others have made it clear that this may not happen.
All is not lost if you find yourself in a pension scheme that is not as flexible as you would wish – you always have the ability to move on. Beware, however, as there may well be exit fees to pay if you transfer away.
If you are already in QROPS, then your decisions have already been made, but if you are still contemplating a move and thinking about making use of the new flexibility, do check that you will be able to do all that you plan to. If you cannot confirm this now, then perhaps the best plan is to wait and see if the new rules are implemented by your provider.
However, with a General Election in the UK next May, a change of government might just result in a change of policy. You may need to act quickly in the Spring of 2015 to avoid disappointment.