QROPS Flexible Drawdown Allowed in New Draft Legislation

QROPS Flexible Drawdown Rules for 2015

Unexpectedly on Friday afternoon, December 17th, HMRC introduced a new statutory instrument (SI) to come into effect next year that seeks to align the regulations for overseas schemes (including QROPS) with the changes introduced in the Taxation of Pensions Act 2014, relating to UK pensions.


In other words, you should be able to in theory, cash-in your pension at 55 or take maximum pension income as you see fit or take your pension in tranches of cash lump sums.

What is not entirely clear at this point is how they will be taxed. But, currently income tax in Gibraltar is only 2.5% on income and there is no tax on death after 75 years of age unlike the UK which imposes a 40% tax on lump sums on death after 75 and UK income taxes of up to 45%.

These new regulations received Royal Assent on December 17th 2014 and come into effect from April 6th, 2015.

The new amendments to QROPS are subject to consultation over the next month and they could be subjected to further changes.

New QROPS Flexible Drawdown Draft Legislation

• The requirement for 70% of the tax relieved fund to provide an income for life has been removed.
• A minimum retirement age of 55 has been introduced, which must be the same as a UK scheme. Formerly, you could take a QROPS in Malta at 50. This is now not possible.

There are also a few technical changes around reporting.

What does this mean for the QROPS landscape in 2015?

  • QROPS will be able to provide greater flexibility in terms of how benefits are paid – however this may mean some changes to local legislation (Malta, Gibraltar and Isle of Man in particular) so the benefits may not be immediate, although we do envisage that legislators in these territories will act quickly.
  • As it stands, the restricted ability to retire from age 50 from a Malta QROPS will not be available post-April 2015.
  • For many permanent British Expatriates, the ability to move pension funds away from potentially more UK changes between now and retirement is enhanced, with the restrictions on taking only 30% as a Pension Commencement Lump Sum being removed.
  • This is subject to changes in local legislation, as mentioned above.

Clients need to ask for a full pension review as to the choice of jurisdiction to hold retirement funds. Please go to our contact page or click the chat box to speak to a QROPS specialist.

The new amendments on overseas pensions has essentially removed a hurdle many expats were concerned about when considering moving their UK pensions offshore. This is welcome news for pension freedoms for British expats. With a Labour government now 7% ahead in latest polls, now is a good time to move as we don’t know if these pension rules will be amended with Labour in power or whether Labour will increase UK income taxes.