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March 2015

New statutory instrument on QROPS

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SI2015/673 released on 13th March 2015

In December 2014 HMRC released a draft statutory instrument that varied the conditions for listing as a QROPS.  That draft has now become a real statute  SI 673 of 2015.

It has changed somewhat from the draft.

The SI is released without the “70% rule”  amendment.  This originally was to be removed and a new provision inserted out making a requirement for a manager of the scheme to be regulated by a body where the scheme is established which regulates the management or provision of services by such schemes. The explanatory memorandum states that the “70% rule” remains in place temporarily, so that the legislation to replace the 70% rule can be targeted more precisely to ensure that the principles behind allowing transfer to be made free of UK tax can continue to operate as Parliament intended.

There is no description of any timescales for any further changes.

The changes that make it mandatory to have a minimum pension age (currently age 55) are made as proposed.

An extract from the actual explanatory memorandum is as under:

“This instrument was published on 19 December 2014 for a four-week technical consultation in line with the Tax Policy Framework. There were 20 responses, most of which were minor and technical in nature. As a result of the consultation the changes to the information requirements have been shortened and the “70% rule” (which requires 70% of funds that have received UK tax relief, either in connection with contributions or as a result of a tax-free transfer, to be designated to provide the individual with an income for life) remains in place temporarily. This is so that, in the light of subsequent events, the legislation to replace the 70% rule can be targeted more precisely to ensure that the principles behind allowing transfer to be made free of UK tax can continue to operate as Parliament intended.”

Overall – this does leave QROPS somewhat in limbo pending the changes which are due but apparently need to be more precisely targeted.  As things stand QROPS will generally not have pension access flexibility until the changes occur.  There is also no news on how the IHT provisions will be amended, if at all, once the proposed changes to the 70% rule are made.  All in all, not entirely helpful.  Hopefully, the wait for the more “targeted” changes will not be too long.