Asset Protection

UK treasury takes action to close Qrops loophole

By added on 06/08/2015

The Treasury is eyeing closing a loophole which allows expats with unfunded public sector pensions to transfer their pots abroad, reports the FT Adviser.

Following legislation under the Pension Schemes Act in April, the Treasury banned transfers from an unfunded public sector pension scheme to overseas pension schemes based on defined contributions or flexible access arrangements.

But the Treasury has now said it is looking to shore up overseas pension legislation after it emerged it is still possible for unfunded public sector pension members to transfer into overseas pensions which are not occupational schemes and are administered in the European Economic Area.

Last month Teachers’ Pensions, the organisation responsible for administering teachers’ pension schemes on behalf of the government announced on its website that there was a loophole in the system.

‘It has come to light that the legislative changes introduced from 6 April 2015, restricting transfers from unfunded public service pension schemes to schemes offering flexible access to pension benefits, do not extend to those Qrops schemes which are not occupational pension schemes and which have their main administration in a state in the European economic area,’ it said.

It added that the organisation was writing to members who had applied to transfer their benefits in such a manner to reconfirm their decision, and that it was aware the Treasury was planning further legislative change to close the loophole.

‘Consequently members need to be aware that in order for Teachers’ Pensions to make a transfer payment they must submit the complete discharge paperwork before any such legislation comes into effect,’ it added.

The Treasury has now confirmed it is looking to close the loophole, and is consulting with pension schemes to enforce a change.

‘We are clear that the transfer restrictions from unfunded public service pension schemes should apply to transfers to qualifying recognised overseas pension schemes, including those based in the European Economic Area,’ a Treasury spokeswoman said.

‘We are currently consulting with pension schemes ahead of introducing legislation to enforce this.’