The HMRC Qualifying Recognised Overseas Pension Schemes (QROPS) list is sometimes mistaken as a seal of approval that a listed pension plan meets all the rules required of it. This implies that it can accept UK pension transfers without a draconian penalty being applied. Furthermore, it can also be mistaken that a pension provider not appearing on the list will automatically be subject to an unauthorised payments charge. Both misconceptions are wrong.
Potential pension transfer penalties
Some background first. UK pensions can be transferred overseas so long as the receiving pension scheme meets all the rules applied by HMRC. These regulations are in place due to the funds having benefitted from government tax breaks on the condition that they follow set UK rules. The QROPS rules do differ slightly to accommodate overseas jurisdictions’ differing pension laws.
- Any recognised overseas pension scheme that follows HMRC’s rules is deemed qualifying and will be entitled to a tax free pension transfer
- Any UK pension transfer to an overseas scheme that does not follow HMRC’s rules is liable to refund the tax breaks that have been afforded to it via an unauthorised payments charge
Whether a pension is on or off the HMRC QROPS list does not influence whether a charge is applicable.
Is the QROPS list supplied by HMRC reliable
Yes, though it should never be used as the only check when confirming if a QROPS provider is qualifying or not. Although QROPS rules demand that providers notify HMRC should they no longer meet the qualifying criteria a company’s inclusion on the list could remain even if it becomes non-qualifying. This is due to the self certifying process employed. For example, a scheme may believe it meets all the rules required but on further inspection by HMRC it could be deemed to fall short. In this instance pension holders may become liable for a penalty. As such, the HMRC list should only be one of a number of checks to confirm the validity of a QROPS provider.
Consequences of a QROPS scheme losing its qualifying status
If your QROPS provider no longer qualifies you may not be required to either transfer your pension or pay a penalty. The exact consequences will depends upon both when you transferred and when the scheme stopped being qualifying.