Gibraltar between a rock and a hard place over QROPS

Gibraltar’s financial authorities are finding themselves between a rock and a hard place as they fear the country may lose valued status on the HM Revenue and Customs QROPS list.

Pension administrators are in talks with UK tax authorities about Gibraltar’s controversial 0% income tax for the over 60’s and are accusing rival pension companies in Guernsey of spreading rumours that Gibraltar is about to dropped as an ‘allowed’ place to transfer UK pensions.

Removal from the list would mean that no UK pension provider would allow pension transfers to a Gibraltar based scheme, effectively cutting the country out of the market.

Gibraltar companies STM Fidecs and Castle Trust have set up an Association of Pension Fund Administrators (APFA) to counter the bad PR and to formulate the jurisdiction’s QROPS products. They are locked in talks with HMRC about the nitty gritty of the terms and conditions that their QROPS products need to meet to retain HMRC  ‘allowed’ status.

APFA chairman David Erhardt said: “We think that we have fulfilled all the necessary requirements and are hoping the scheme gets the go-ahead soon. Gibraltar needs this to be resolved to avoid any kind of confusion. The bad publicity we could receive from being taken off the QROPS list would be disastrous, just as it was when it happened to Singapore.

“Gibraltar as a jurisdiction needs to ensure that this is resolved to retain the right of Gibraltarians to transfer their UK pension funds. It is really a case of ensuring that we do not get an unjustified bad global reputation.”

Tax

The issue that is causing the delay is that Gibraltar taxes income for the over 60’s at 0%. HMRC wants another band of income tax introduced that would catch higher income earners.

The Gibraltar QROPS scheme will also have a maximum 25% fund drawdown - that would allow the product to compete with those offered by Isle of Man pension providers. Currently, the Isle of Man is the only pension provider to allow a 30% QROPS drawdown.

APFA secretary, Jane Caulfield, believes that a lack of an agreement could have a negative impact: “If Gibraltar cannot accept QROPS, people could easily transfer their overseas pension funds to places like Guernsey. That is why we have received no help from other jurisdictions as it would be in their best interests for us to be out of the picture.”