In early 2012, the Bailiwick of Guernsey’s
was a Qualified Recognised Overseas Pension Scheme (QROPS) superstar. Among the
top three most popular destinations for British expat pensioner’s assets since
2006 when QROPS were introduced, within a few years Guernsey had handily taken
and held the top slot. Then, in May 2012, HMRC passed Statutory Instrument 1221
(SI 1221), which ruled that Guernsey could not offer preferential tax rates to
non-residents and any QROPS in violation was to be disavowed.
Of Guernsey’s 313 qualified
QROPS-providers, SI 1221 left 3 intact. Literally overnight (the night of May
25, 2012) Guernsey’s QROPS economy was razed to nothing. As more pensioners had
laid their nest eggs there than anywhere else, the collapse came as an
understandable shock, and one felt well beyond Guernsey. If the most popular,
established and trusted destination for QROPS investment was so vulnerable, how
safe could the rest of the industry be and where could expat pensioner
investors feel comfortable caching their money?
In short order it became apparent Malta was
the answer to the latter part of that question. Immediately after SI 1221
poleaxed Guernsey’s QROPS-based financial sector, Malta responded by securing
low general tax rates and the absence of inheritance, income/pension income,
pension lump sum or capital gains taxes, rendering them a viable and attractive
QROPS harbor. The tax rate whittling, however, was just part of Malta’s plan to
specifically tailor their economy and its foreign relation policy to
accommodate foreign investment, QROPS and QNUPS (Qualified Non-UK Pension
Schemes) in particular.
What really launched Malta into the
stratosphere of QROPS ascendency was their rigorous adherence to HMRC’s new
regulation and the seeking out of double taxation agreements (DTAs) with (at
the time of this writing) 67 other nations, including those most popular with
British retirees. The DTAs allowed pensioners to invest their pensions in such
fertile territory while not obliged to physically settle the same. Expats in
Spain, France, Belgium, the USA, Canada, the Bahamas, Morocco, Italy, or any of
the other 67 states, can live abroad with their QROPS in Malta and subject to
Maltese tax rates and benefits. More importantly, they can do so without paying
taxes to Malta, wherever they’ve retired and conceivably the UK as well.
Appealing as that dynamic has proved for so
many, a nagging anxiety has persisted. The blow that felled Guernsey had struck
swiftly and was almost universally unexpected. As such and unsurprisingly, it
hasn’t been uncommon for those with or considering investing in a QROPS to ask,
“What is there to stop the same from happening in Malta?” Recently, those
anxieties have nagged their way closer to the surface with HMRC’s recent
release of their 2013 Draft QROPS regulations for public comment, which
outlines the most significant legislation to affect QROPS since SI 1221 last
year.
Of
course, there are no certainties in life except death and… well, in this case I
suppose we can’t even be entirely certain of taxes (or at least the
continuation of preferential tax rates). However, those concerned with a repeat
of Guernsey in Malta need not fear, particularly on account of the recent HMRC
draft. Because their economy has been so assiduously designed for QROPS
investment; their membership in the EU; their core banks’ history of
conservative choices, little risk-taking and a holding of assets that are only
223% of the nation’s GPD (rather than the 600-1200% or more that’s common for
many European nations’ banks), Malta itself seems an unlikely candidate for any
massive, drastic delisting or destabilization.
Plus, the nature of HMRC’s recent
legislation, like Malta’s financial future, should reassure expat pension fund investors rather than unsettle them. The Draft is
primarily focused on ensuring timely, accurate and thorough reporting on
account information from QROPS managers. These include a requirement for any
overseas QROPS/QNUPS manager to report payments to their clients from any funds
transferred out of the UK, even if the scheme is no longer technically a QROPS.
Included in the legislation are instructions for managers on sending this
information electronically, which should simplify the process.
Portions of the statute are dedicated to
reinforcing and outlining penalties for non-compliant former and current QROPS
administrators. None of those conditions should have any effect on Malta’s
legitimate QROPS industry and as such should have no adverse effect on anyone
invested in a legitimate Maltese QROPS. That should be good news for a great
number of investors and future investors, considering Malta’s popularity.
Author:
Mario Vitanelli is a freelance writer and blogger who specializes in international politics and finance, retirement and investment. His areas of expertise include European, Asian and Latin/South American economic policy and QROPS. When away from his keyboard, he enjoys photography and appreciates the rest of the Vitanelli family’s endless patience with his football dependence.
