Budget 2024 - QROPS, ROPS, OPS and further chops
Andy Wood • October 31, 2024
QROPS, ROPS, OPS and further chops
Introduction
The QROPS provisions allow the transfer of funds from a UK registered pension scheme to an overseas pension scheme without it being an unauthorized transfer.
Further, OPS and ROPS, as well as providing the building blocks for QROPS status, also provide for some benefits in their own rights.
Back in 2017, the Government curtailed some of the benefits and introduced something call the Overseas Transfer Charge.
Budget 2024, providing further chops to this regime.
Overseas Transfer Charge (“OTC”)
The Overseas Transfer Charge (OTC) is a 25% tax charge on transfers to QROPS, unless an exclusion from the charge applies.
That exclusion, prior to this announcement, applies in two distinct cases:
- Where the transfer is to a scheme resident in the same place as the member; and
- Where the transfer is to a scheme established in the EEA and Gibraltar
However, for transfers taking place from 30 October 2024, the second exclusion is removed.
The European Economic Area (EEA) is a single market that includes the 27 European Union (EU) member states and the three European Free Trade Association (EFTA) countries of Iceland, Liechtenstein, and Norway
This is likely to be deleterious for QROPS providers in those affected jurisdiction.
The Government also announced that from 6 April 2025, the conditions of OPS and ROPS established in the EEA will be brought in line with OPS and ROPS established in the rest of the world, so that:
- OPS established in the EEA will be required to be regulated by a regulator of pension schemes in that country
ROPS
All QROPS are OPS and ROPS, but not all OPS and ROPS are QROPS!
This word salad is relevant.
This is because, in the Budget, the Government also announced that from 6 April 2025, that there will no longer be separate requirements for a scheme established in an EEA as opposed to the rest o the world.
Broadly, this means that:
- An Overseas Pension Scheme (“OPS”) established in the EEA will be required to be regulated by a regulator of pension schemes in that country; and
- A Recognised Overseas Pension Scheme (“ROPS”) established in the EEA must be established in a country or territory with which the UK has a double taxation agreement providing for the exchange of information, or a Tax Information Exchange Agreement
As such, this might affect some QNUPS providers.
UK Registered Pensions
Also, added on to this particular budget missive is that, from 6 April 2026, scheme administrators of registered pension schemes must be UK resident.
Conclusion
These changes seem to be as a direct result of Brexit. As the UK is no longer in the EU, it can shrink the scope of tax relief and benefits. It might have taken a few years, but it seems like this is beginning to take place, starting with overseas pensions.
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