Friday, February 19, 2010
Qualifying Registered Offshore Retirement Schemes (QROPS) regulation in Guernsey looks set to be tightened up in order to give greater protection to investors.
The measure follows pressure from pension providers on the island who have raised concerns that unregulated advisors are using Guernsey to mis-sell QROPS to investors and, by breaching current regulations, leaving them with tax charges on pension transfers of up to 55% on their total fund.
Onward transfers from Guernsey to other QROPS providers are currently limited to a tax-free cash drawdown of 25% of the existing fund; one proposal is to increase this limit to 30%. There is also a proposal to limit one-off lump sum payments to GBP30,000.
Guernsey QROPS Committee chairman Roger Berry said: "These are only proposals but they have strong backing and if supported at government level will in all likelihood become law."
"Let’s be clear, unregulated advice on pension transfers is occurring in the QROPS market. From a UK-centric perspective, where pension transfer advice is well regulated, that will be an uncomfortable fact and a natural reaction is of disappointment and wonder how this is allowed."
Berry warns investors to be wary of schemes that offer to transfer small sums and schemes that offer to sanction transfers from defined benefit schemes. "Frankly, where there is little room for excuse is the transfer of final salary or defined benefits schemes. Unless the transfer is trivial in size, if your prospective new QROPS trustee is happy to accept such a transfer without independent assessments or an equivalent report being provided to you, alarm bells should be ringing."
Meanwhile, fears that New Zealand could lose its QROPS status over concerns with its Kiwisavers scheme, regarding tax breaks applicable to employer contributions, have been allayed. The issue is reported to have been resolved between HM Revenue & Customs (HMRC) and New Zealand's government actuary, and the Kiwisavers scheme continues to appear on HMRC's list of approved QROPS.
In other QROPS news, deVere Group was reported to be leading the way in the QROPS market. The group claims to have transferred GBP98m – nearly a quarter of all UK transfers – to offshore pension funds. CEO Nigel Green commented: "The expatriate market has always been our area of expertise. As more people move and retire abroad, there is an increasing need to service these individuals and in some cases help them transfer their UK pensions offshore."