NO FLEXIBLE ACCESS FOR GIBRALTAR QROPS

Recent articles have highlighted the fact that Gibraltar has decided not to allow flexible access to pension schemes, describing it as a surprise whereas in reality it has been something that Gibraltar has been concerned about for a while.

What are flexible benefits?

This is a way of accessing pension savings in a flexible way as a member over the age of 55 can now in a UK scheme take as much as they want as quickly as they want. Initially this was not an option for QROPS but recently it was allowed for EU schemes such as Malta and then opened up to all QROPS.

Why doesn’t Gibraltar want flexible benefits?

Gibraltar had an issue with HMRC several years ago over the tax rate on pension income which was 0% for members over the age of 60. HMRC did not feel that was a tax and therefore a rate of 2.5% was introduced. The issue has always been that whilst HMRC were happy with that low rate for a pension for life they probably wouldn’t be happy for it to stay at that level with flexible benefits.

Therefore, Gibraltar has taken the cautious approach so as not to rock the boat and has not introduced the flexibility.

What happens to pension income in Gibraltar?

In the absence of flexible benefits Gibraltar will have to pay an income for life based in annuity rates, which limits the amount that can be taken each year.

What is the impact for Gibraltar?

Most members will want the option of flexible benefits even if they don’t take advantage of it, therefore where possible members will use Malta as a QROPS jurisdiction. Existing members in Gibraltar may also consider moving to Malta to get the flexibility and they should be able to do that even though Gibraltar doesn’t provide the option. It could also be a way of trying to keep long term business in Gibraltar rather than the whole fund being cashed out.