In a statement HMRC has said its digital offering, used by managers and administrators of pension schemes to report information about overseas pension schemes, including transfers to and payments from QROPS, will no longer be available from 5 April 2017.

From 6 April 2017, pension scheme managers and administrators will need to use the existing forms and reference material instead of the QROPS online service. No reason for shutting down the service three years after it was set up in late 2013 has been given.

HMRC has been tightening the rules around QROPs for some time. The autumn statement 2016 included a number of new provisions designed to ensure the tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones.

Previously, QROPS were only exposed to tax on 90% of pension income for UK residents. This will now be increased to 100%. In addition, the period of taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief has been increased from five to 10 years.

There were also moves to align the tax treatment of funds transferred between registered pension schemes, and to update the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes.

Omission

However, Aries Insight, the technical pensions legislation specialist, has warned that the omission of QROPS from the government’s consultation list of statutory transfer destinations, undertaken as part of moves to increase pension protections, could inadvertently hamper some members.

The Treasury and the Department for Work and Pensions included proposed new regulations in this area as part of a 10-week consultation on tackling pension scams, which closed this week on 13 February. 

Ian Neale, director at Aries, said: ‘Overseas transfers can represent a concerning area for scams, but there are also legitimate transfers abroad that should not be restricted by blanket legislation. 

‘There are a great number of people who have come to the UK from overseas to work and have spent their adult life earning and building up pensions savings. Should they wish to return to their homeland to retire, the proposed legislation would not give them an automatic right to transfer their funds abroad – which would undoubtedly represent an easier and cheaper way for them to take their money in retirement.

‘Others affected could also include people working overseas who have been offered generous scheme terms by their new employer or private scheme and would be much better off in retirement if they were allowed to add their old UK benefits to their total.’

Neale pointed out the consultation provides a recommendation that the only statutory rights to transfer should exist where there is an employment link, an FCA-regulated firm or a master trust arrangement. He argued that this meant some people would not be able to make choices that could ensure a better retirement future.

‘Instead of removing overseas transfers from the statutory list, perhaps the focus should be on improving the assessment of overseas schemes to separate the scams from the safe destinations,’ he said.

HMRC’s QROPS forms and reference material is here.

Pension scams consultation, closed 13 February, is here.