Specifically, Philip Hammond announced that:
- the “70% rule” will be removed from the conditions that a pension scheme has to meet to be an “overseas pension scheme” or “recognised overseas pension scheme.”
We can confirm that this change did indeed take effect on 6th April 2017, which means that when they reach age 55, members of QROPS can now withdraw 100% of their fund. Funnily enough, this is something of a reversal by HMRC, who amended the QROPS rules in 2012 precisely to prevent this happening!
Here at GBPensions, we feel this is generally good news for clients, as it endorses our view that they should be allowed to access as much of their fund as soon as possible in order to gain control of their retirement funding, and to benefit from prevailing rules before the goal posts inevitably move again.
This legislative amendment also brings a parity that was previously lacking, as our QROPS clients now have the same access to their fund at age 55 as our SIPP (Self-Invested Personal Pension) clients.
If a member does decide to make a complete withdrawal, it is entirely up to them what they choose to do with their money. But being able to take that lump sum certainly allows a client to take control of their retirement funding and does open the door to potentially more flexible investment options.
Ensure you understand all of the issues before deciding on a full withdrawal
Many QROPS rely on their members remaining as long as possible in order to ensure the viability of the scheme over the longer term. Consequently, we’re aware of a number of QROPS that have already amended the terms of their scheme, or are considering doing so.
These amendments largely impose exit fees on members should they decide to withdraw their entire fund from the QROPS at age 55, in the very first few years of investment. In an ideal world, of course we’d prefer no exit charges for our clients, but we acknowledge they have to exist to protect all members in the QROPS and to ensure its long-term viability.
Every person’s circumstances are different, which has caused some confusion within the pensions industry on how the exit fees are applied. In many cases clients will be no worse off than they would have been based on the old rules.
In general terms, exit charges of up to 3% can now apply, but these fees depend on a number of factors, including the age of the QROPS member, how long they’ve been invested with the scheme, and the amount they wish to withdraw. Every case has its own particular set of circumstances, which is why we’re going to great lengths to go through all this with our clients to ensure they understand if or how they might be affected.
If you are unsure about the new rule changes or if new exit charges might affect you, please get in touch and we’ll happily clarify the situation. As always, we want you to have accurate and relevant facts to help you make an informed and appropriate decision.