No USA on HMRC QROPS List

No USA on HMRC QROPS List.

Three weeks ago all Canadian approved qualifying recognised overseas pension schemes (QROPS) were removed from HMRC’s approved list.

Last week, the final USA approved pension scheme was removed meaning there are currently no HMRC approved QROPS for people wishing to transfer their UK pensions benefits.

This means if you are a UK or USA national now resident in the USA, you no longer have the means to transfer your pension to the US.  If you wish to transfer out of the UK to an overseas pension, you will have to look to other jurisdictions such as the Isle of Man, Gibraltar, Malta etc. The problem then being the need to double check any tax treaty between the US and these territories to ensure no penal tax treatment.  Certainly, the existing US/UK tax treaty and article 17 of the same, regarding pensions is clear and fair on both sides.

Why are they losing QROPS approval?

The UK launched pensions flexibility rules nearly two years ago but left QROPS to comply with old ‘capped’ drawdown rules.  If your pension scheme overseas is too flexible in terms of accessing pension funds, HMRC will likely not approve a transfer from a UK pension scheme to it.  Many may say this is not fair, the reality is that HMRC granted tax relief of between 20% and 45% when both you and/or your employer paid into the pension scheme so they do have a say in how you are then able to access those pension funds in retirement.

Indeed, we also believe it is a move to stop UK pension money leaving the UK.

That’s still not fair!  It actually probably is.  Australia does not allow ‘Supers’ to be transferred to the UK and only recently allows them to be transferred to New Zealand.  In the US, your 401k would be taxed in the US when you withdraw it, so you can send it overseas but you would already have been subject to tax there.

We have seen a raft of scheme removals over the last few years with places like Australia and New Zealand suffering similar fates with removal.  New Zealand has gradually rebuilt an approved retirement scheme list and in Australia, the trend appears to be individuals setting up the own superannuation scheme in Australia that complies with UK flexible retirement rules and then seeking approval from HMRC.