Brexit’s impact on QROPS transfers

Anyone who tells you that they know for certain how Brexit — Britain’s vote to exit the Eurozone — will impact pensions and Qualifying Recognized Overseas Pension Schemes (QROPS) is lying. Much is still unknown; reactions Friday included the pound going into freefall against the dollar and 10-year UK government borrowing costs sinking below 1 percent for the first time ever.

Now-resigned UK Prime Minister David Cameron will leave his post by October. Then — no longer part of the union — the UK will renegotiate its trade, business and political arrangements — a complicated process which could take up to two years.

Expats in Europe and British expats living elsewhere have questions, but there are no quick answers.

Sources of concern

Expats in Europe are concerned not only about their pensions and how they will be paid, but also about taxes and levies on those payments. With the UK no longer a member of the European Union (EU), it’s an unfamiliar playing field.

QROPS transfers for British expats living in other countries fall under Her Majesty’s Revenue & Customs (HMRC), not the EU. Therefore, it needs to qualify under HMRC rules. According to Alan Kentish, interim chief executive of STM Group, UK citizens will still be able to transfer their pensions to Europe via a QROPS.

Don’t forget, also, that expats are long-term investors; some still have property and savings in the UK, as well. So it isn’t just pension transfers that are a worry for them. The long-term impact on asset prices in the UK from property to shares will take time to become apparent.

Defined-Benefit (DB) schemes could also come under pressure, however, due to lower economic growth in the UK that stems from the overall uncertainty. With lower economic growth potentially reducing equity returns, an argument to transfer out of DB schemes could certainly be made.

So while Britain’s invocation of the Lisbon Treaty’s Article 50 is sorted out — the formal, two-year process for Brexit to be official — it should not take long to get a better understanding of the impact that Brexit will have on UK-based pensions.

In the meantime, keep your panic at bay and keep your portfolios liquid and flexible, and count on Alconbury Trust to keep you informed.

Alconbury Trust LLC is a Registered Investment Advisor in the State of Florida and Texas – USA.

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What Is A QROPS Scheme?

What is a Qualifying Recognized Overseas Pension Scheme? It includes a pension scheme overseas which meets specific requirements established by HMRC, or Her Majesty’s Revenue & Customs. A QROPS may obtain transfers of Pension Benefits in the UK without having to incur an unauthorized payment, as well as scheme sanction fee. This program launched on April 6th, 2006 due to the European Union human rights legislation regarding a movement for freedom of capital.

The Qualifying Recognized Overseas Pension Scheme may be suitable for citizens of the United Kingdome who’ve left to permanently emigrate and who have intensions of retiring abroad having built a UK pension fund up. Alternatively, an individual born outside of the UK having built benefits up in a Her Majesty’s Revenue & Customs-approved United Kingdom pension scheme may move a pension offshore if they have a desire to retire out of the UK. United Kingdom state pensions can’t be transferred, yet defined contribution, SSAS, and defined benefit schemes may be transferred abroad.

The Qualifying Recognized Overseas Pension Scheme doesn’t need to be set up within the country in which you retire, instead you may move the pension to a tax efficient jurisdiction then have it paid inside the country you choose.

Pension rule one within section 165 will provide that no pension payment might be made prior to the date on which the member attain usual minimal pension age, unless the condition was immediately met prior to the member becoming entitled to the pension underneath the scheme.

To become a Qualifying Recognized Overseas Pension Scheme, a pension scheme has to apply to and become approved by Her Majesty’s Revenue and Customs. A QROPS list which have consented to get their names published is obtainable on the HMRC site and regularly gets an update.

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