The 3 core changes that will affect individuals considering a transfer post April 6^th 2012 are:

The removal from the QROPS list of Guernsey QROPS open to non Guernsey residents, and Isle of Man QROPS set up under 50C legislation.

HMRC have taken steps to remove schemes that pay gross withdrawals to non residents in all circumstances. The 3rd party QROPS market (having a QROPS outside the country which you reside) will generally now rely on the use of double tax agreements (DTA’s), and work in a similar way to UK pensions.

This is unlikely to have an impact on residents in the EU, as most countries have appropriately worded DTA’s with Malta which allow withdrawals to be made gross. Other jurisdictions that may benefit from Guernsey and the Isle of Man’s demise are New Zealand and Gibraltar. Malta has 59 DTA’s in total, while New Zealand has 37. Australia is set to continue as the leading non 3rd party QROPS country.

No more 100% cash for most individuals

New Zealand QROPS have been utilised by a large number of individuals, particularly in countries such as Spain; in order to fully extract funds from their UK pensions.

In order for a New Zealand Superannuation Pension Scheme to remain on the HMRC QROPS list, at least 70% of the transferred funds need to be used to provide a lifetime income.

For New Zealand residents transferring to Kiwi Saver Schemes, or for Australian residents transferring to an Australian Superannuation Schemes; 100% cash is still an option.

The QROPS reporting period has been extended to 10 years from the date the pension fund was transferred out of the UK.

This applies to all payments made out of a QROPS from 6th April 2012, and is to be run concurrently with the existing 5 year non residency reporting requirements. This enables HMRC to obtain a higher level of information about whom, and how individuals are benefitting from QROPS.

This may be seen as somewhat of a red herring as the core QROPS benefits are still based upon the 5 year rule. It does however highlight the importance of ensuring that any individuals looking to benefit from a QROPS truly are non resident, as this reporting period has been increased at a time when more stringent residency requirements are being proposed.

For EU residents, the legislation changes should ensure that individuals are transferred to more secure, robust and appropriate solutions than perhaps they have been in the past. While QROPS in Guernsey were well marketed, less attention appears to have been paid to the potential tax consequences for residents of countries such as France, Spain and Germany. In addition, the tight regulation, and proactive compliance with HMRC rules and regulations; jurisdictions such as Malta should offer a more appropriate solution to many EU residents.

It is however important not to underestimate the power that HMRC possess. With that in mind, and the new 10 year reporting period; it may be important for anybody who can benefit from a QROPS, to consider a transfer at the earliest opportunity.