Those of you reading this are probably already aware of the key benefits of a QROPS and who can have a QROPS (not only ex-pats but even UK residents). One of the unique benefits of a QROPS is that it does not have to be situated in the place you happen to be living at the time. Rather, transferring your UK pension into a QROPS enables you to choose the jurisdiction that will benefit you most now, in the future and in retirement. There are a number of options to consider, and your choice of jurisdiction should be guided by the factors covered in our article on Top 3 UK Pension Transfers Destinations. Three of the most popular; Gibraltar, Malta and the Isle of Man predictably happen to be the three safest options. This article goes into more detail on Malta QROPS and the unique advantages of using Providers of Malta QROPS.
In the early days of QROPS Guernsey was the number one jurisdiction, however, HMRC delisted the 300 schemes in Guernsey after a new rule was brought in for QROPS, that is that the schemes must be open to local residents and not a system for UK ex-pats. This opened the door for Malta pension providers with Malta’s strategy to build an economy based on international financial services. Malta now has 21 schemes and is considered as one of the top locations to transfer a pension for those living in the EEA.
Malta QROPS Changes
Discussing QROPS in Malta we need to understand some key benefits in order to understand ‘why Malta?’ A start point is to understand the New QROPS Malta Rules for 2017 to see if it is suitable for you and if it meets your personal and financial objectives:
- Clients need to be 55 before they can draw benefits, this is down from the old rule of 50.
- Clients must live within the EEA and if they leave within 5 years will be subject to the Overseas Transfer Charge of 25%.
- Flexible drawdown is available, similar to the UK, so you can take your pension in periodic lump sums, as an annual income, as a mix of the two or cash in your pension from age 55; tax will be due where you are resident when drawing benefits if there is a Double Taxation Agreement with Malta; if no DTA, you pay Maltese income tax on the QROPS.
- The tax-free lump sum allowed is 25% for clients wanting flexi drawdown.
- Tax rate will depend on where you are living when you decide to draw pension benefits. You will need to look into the Double Taxation Agreements between Malta and the country you reside in to see who gets the taxation rights.
- You then need to look into local personal income marginal tax rates and allowances to see what income tax is payable.
- You need to show proof of tax residence in your country of retirement if you want your QROPS in Malta to be paid out gross. A DTA also needs to exist. Otherwise, you will be taxed in Malta at Malta Tax Rate (personal income tax rates) of up to 35%.
- There is no tax on growth or death in Malta.
- You can invest in the currency of your choice, e.g. GBP, USD or EUR.
- You can invest in the investments of your choice: you can self direct, but you cannot self-manage. The pension trustees in Malta for your QROPS need to sign off on any changes, so you can’t just log-in and make changes like you can in a UK SIPP.
- If you move back to the UK, often your tax on death will be significantly less due to benefits are taken whilst abroad and time spent abroad. Any death taxes in the UK would also be based on the original transfer amount, not any gains.
Benefits of QROPS in Malta
- Strong Regulation -Maltese Financial Service Authority (MFSA) is the regulator and much of its rules are based on those of the old UK FSA and now the UK FCA. It has a robust EU compliant regulatory framework. At the same time, the MFSA ensure that they support business encouraging innovation hence encouraging more providers and more competition and choice for prospective clients.
- Due Diligence – In order to gain approval from the MFSA, the providers of schemes have to go through an extensive due diligence process and must abide by the EU Capital Adequacy Rules
- Growth in Financial Services Sector – In recent years there has been 25% growth in Malta’s finance sector (Finance Malta 2017 Edition).
- English is the primary language of business in Malta making it easy to conduct business and no need for translation of documents saving costs and time.
- Tax Advantages – QROPS Malta Rates– British expats living abroad can now transfer their pensions to a QROPS Malta to avoid paying UK taxes as long as they remain tax resident outside the UK. A Qualifying Recognized Overseas Pension Scheme in Malta avoids up to 45% tax upon death imposed in the UK after age 75 and also avoids UK income taxes of up to 45% when drawing pension benefits. But you have to be careful of the Double Taxation Agreements with the country where you want to draw retirement benefits as you will want to make sure you don’t get hit with a high-income tax on remittance into the country you reside in. You also need to check if you will be taxed in Malta or your country of retirement. https://www.financemalta.org/sections/tax/income-tax-in-malta/
- 65 Dual Taxation Agreements – Malta currently has 65 Double Taxation Agreements with countries around the world (https://www.financemalta.org/double-taxation-agreements/), but you need to study each individual Double Taxation Agreement to understand where the tax liability is. The tax may be imposed in Malta, shared with Malta or be taxed in your country of residence at retirement. Gibraltar QROPS or a UK SIPP may be a better choice in many cases, particularly if you live in a country which does not have a Double Taxation Agreement (DTA) with Malta or you live outside the EEA. If there is no DTA with Malta in your country of residence, you would pay income tax in Malta on any retirement benefits you receive.
- Member of European Union and is on the OECD white list and has a dedicated pension regulator which all contribute to its excellent reputation for financial safety, prudence and responsibility. http://www.internationaltaxreview.com/Article/3536277/Malta-Malta-publishes-Common-Reporting-Standard-guidelines.html
- HMRC Co-operation – Because Maltese QROPS were originally designed according to British guidelines in co-operation with HMRC, this jurisdiction’s schemes benefit from having a similar foundation so generally easier to understand.
- Life Time Allowance – For those not yet retired who have large pensions pots there can be a danger that with additional pension contributions, the growth of the funds or the revaluation of DB schemes that scheme could exceed the lifetime allowance. By transferring to a QROPS the LTA is fixed at the time of transfer so future grows does not impact the percentage of LTA used by the scheme.
- Malta is a nice place to visit and easily accessible if you want to meet you provider face to face.
Some well-known providers of Malta Pensions and QROPS Solutions
- Atom – Ex JTC
- MC Trustees