New code brings high moral ground for Gibraltar QROPS

New code brings high moral ground for Gibraltar QROPS

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New code brings high moral ground for Gibraltar QROPS

Universal adoption of an Approved Code of Practice for importation of UK expatriates’ personal pensions schemes has emerged as the cornerstone of Gibraltar’s bid to gain significant new business for the finance sector.

The move by members of the Gibraltar Association of Pension Fund Administrators (GAPFA) was revealed by chairman Steven Knight at a sector seminar, Gibraltar QROPS – Care, Compliance and Certainty, attended by more than 80 professionals yesteday, Wednesday, 27 June 2012 at the Elliot Hotel.

By committing to “the highest standards we can claim and retain the moral high ground”, he said, that will “provide a long term secure QROPS business model, that is fully compliant – at all times – with UK and EU legislation and practice”.
Knight told his audience: “There will be no pension-busting, no non-compliant investments permitted as has occurred in some other jurisdictions with QROPS.”
The Code, being developed by GAPFA’s 20+ members in conjunction with the Financial Services Commission (FSC), builds on Gibraltar tax and distribution legislative changes unanimously agreed in Parliament on Friday for imported overseas pension schemes.

The amended law comes into effect tomorrow.

Imposition of a 2.5% tax on all pension distributions and insisting a minimum of 70% is used for provision of a pension for life were introduced to allow The Rock to once again attract new Qualifying Recognised Overseas Pensions Schemes (QROPS) business from the UK.

Fund administrators voluntarily halted acceptance of new pensions when the UK Inland Revenue queried, amongst other things, Gibraltar’s application of Zero Rate tax.

Whilst GAPFA worked with government towards resolution of the problem, other jurisdictions developed “non-compliant strategies” that led to 360 QROPS – mostly in Guernsey, but also in Jersey and the Isle of Man – being delisted in March by HMRC, but no existing Gibraltar schemes were removed.

Chris White, Partner and Tax specialist at law-firm Hassans, pointed out that because the legislation was retrospective to 2006 when QROPS first became possible, the sponsors of those existing Gibraltar schemes now “need to have their deed/rules amended to come within the Imported Pensions Legislation, pay the 2½% tax on distributions made since importation and approach HMRC to seek their approval”.

Nevertheless, Minister for Financial Services, Gilbert Licudi, who launched the Seminar, said when the draft legislation was introduced: “We have opened up a line of business to be tapped and it is up to the professionals to make it work. It is important to learn from the experience of other jurisdictions. “

In the meantime, Gibraltar’s new Code, to be reviewed annually and updated to ensure on-going acceptance by HMRC, would give “unparalleled best practice for QROPS to the highest standards of any jurisdiction”, Knight maintained.
QROPS providers who were Trust administrators brought fiscal regulation and there would be independent overview and review, Knight explained.

Guidelines on such aspects as full up-front disclosure of all costs and fees, penalty free transfers out, investment policy and a disputes procedure, were all being developed for early implementation, he assured seminar attendees.
“In this way, we have full transparency and openness that benefits both clients and providers, Knight, who is chairman of Castle Trust Group, said.
“Although this might seem like a “belt ‘n’ braces” arrangement, it does give greater certainty for clients and their independent financial advisors and much-needed future-proofing in respect of any changes that the HMRC may make in future”, he insisted.

Marcus Killick, chief executive of Gibraltar’s Financial Services Commission (FSC), agreed the importance of “injecting quality into service provision”; the FSC’s new membership of the International Association of Pension Supervisors would bring both “standing and access to wider experience and training”. The GAPFA’s Code represented best practice and would be the starting point for FSC scrutiny of imported pension schemes, he confirmed.

GAPFA aims to hold regular meetings with Gibraltar’s Tax Department to “smooth and optimize QROPS registration, distributions and transfers out”, which Gibraltar controls by preventing the passing on of capital to a scheme in another jurisdiction that does not at least meet its standards on taxation and distribution.

This is a key factor that Knight sees as reassuring HMRC of the jurisdiction’s commitment to ensure only fully compliant procedures and processes are adopted for these overseas pensions schemes that give expatriates much greater flexibility and control of their assets as well as inheritance and other benefits.

But as Nigel Sloam, who heads a firm of Actuaries & Consultants carrying his name with offices in the UK and Monaco, pointed out, it is essential that fund administrators ensure individuals do not receive personal loans from their pension pot, nor are allowed to invest in residential property or tangible ‘moveable’ property such as works of art, classic, fine wine etc. Those would attract tax penalties of up to 70% of the price paid for being ‘unauthorised’ investments.

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New code brings high moral ground for Gibraltar QROPS

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