What are QROPS?
QROPS are Pillar II pension schemes established outside the UK, recognised as such by Her Majesty's Revenue and Customs (HMRC). The administrators of a pension scheme established in Malta may apply to HMRC for formal acceptance of the scheme as a QROPS. Once approved as a QROPS, the Maltese scheme could accept funds / assets transferred from existing UK pension schemes. As such, an individual having accumulated benefits under a private pension in the UK, but who has left the UK to take up residence elsewhere (not necessarily Malta), may transfer such benefits to a Maltese QROPS.
A Maltese QROPS would be regulated by domestic legislation – specifically, the Special Funds (Regulation) Act, Chapter 450 of the laws of Malta and subsidiary legislation promulgated thereunder. Such legislation is suitably comprehensive and meets the high standards set by HMRC. Still, a Maltese QROPS may afford greater flexibility as regards investments and withdrawals (when compared to corresponding UK schemes) and is likely to be attractive from a tax perspective. In light of the comprehensive and high quality of Malta's applicable legislative framework, and the ongoing scrutiny of that framework and of domestic schemes by the local single regulator (Malta Financial Services Authority), such additional flexibility and tax advantages would not be achieved at the expense of investment security – an overriding concern, particularly in the context of retirement pensions.
Setting up a QROPS in Malta
A QROPS would be established in Malta in the form of a trust or otherwise by contract. Each scheme must be licensed by the MFSA. Such a license would be procured pursuant to the submission to the MFSA of an appropriate application, the accompanying trust deed / scheme document (detailing, for example, the purpose and rules governing the scheme) and any other documentation or information required by the MFSA. The MFSA would consider the application and supporting documentation having regard to:
- compliance with the provisions and requirements of applicable legislation;
- the protection of investors and the general public;
- the protection of the reputation of Malta taking into account Malta's international commitments;
- the protection of competition and choice; and
- the reputation and suitability of the scheme administrator and any other parties connected to the scheme.
Every Maltese pension scheme (established under the Special Funds (Regulation) Act) must appoint an auditor and an administrator – approved for the purposes by the MFSA. The administrator may be responsible for the day to day management of the scheme. However, a licensed asset manager would be required to manage the assets of the scheme should the administrator not have the required competence and/or facilities in this regard. The trustee of a scheme set up as a trust may also undertake the functions of administrator provided, of course, that the trustee has all requisite expertise and resources. The MFSA may also require the appointment of a custodian charged with safekeeping all assets pertaining to the scheme and, perhaps, monitoring the administrator in the exercise of its duties.
Once a pension scheme is established, the administrator/s would be required to apply to HMRC for formal recognition of the scheme as a QROPS.
When can the contributor benefit from a Maltese QROPS?
The beneficiary under a Maltese QROPS may only receive benefits from the scheme once s/he shall have attained the age of fifty but before s/he shall have turned seventy (although benefits may be accessed earlier in limited prescribed circumstances should, for example, the beneficiary suffer permanent invalidity or death). However, upon maturity, the beneficiary would be entitled to opt to take an annuity and/or a lump sum payment. Details as to timing and amounts of benefits would be specified in the trust deed / scheme document.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.