Tougher UK tax avoidance rules have closed hundreds of offshore pension schemes sheltering billions of pounds for ex pats and international workers.
HM Revenue & Customs introduced the rules on April 6 – and the result is 360 qualifying recognised overseas pension schemes (QROPS) in Guernsey, the Isle of Man and New Zealand have closed to new business.
The new tax rules demand offshore financial centres offer the same pension benefits to residents and non-residents and outlaw any scheme aimed at giving a financial advantage to non-residents.
Guernsey has suffered worst – with the 305 QROPS operating before the new rules reduced to just three.
In the Isle of Man, 16 schemes closed, leaving 173 open for business, while 41 of New Zealand’s 63 QROPS shut up shop.
The new tax laws are seen as an attack on offshore financial centres hosting ‘third party’ QROPS – which let the pension member live in a different country from where the QROPS is based.
QROPS are big business for offshore financial centres, with around £5 billion of pension funds transferred overseas from UK funds since QROPS started in April 2006.
Thousands of ex pats and international workers invest in a QROPS as for tax advantages, flexible investment options and shelter from currency exchange rate fluctuations.
Guernsey and New Zealand were among the market leaders until tax rules changed.
The QROPS market is still open and offers retirement savers plenty of choice as around 50 countries are offering about 2,000 schemes.
QROPS investors with money locked in a closed scheme are urged to review their pension plans with an independent financial adviser with specialist knowledge and experience.
No indication is available of when the closed schemes may reopen or what will happen to the funds lodged with them.
HMRC has promised that retirement savers with funds in QROPS meeting qualifying rules before April 6 will not face tax charges.