Rex Cowley, Head of Marketing & Products, Close International, comments on Isle of Man entering QROPS arena:
“With a market value of circa 575 billion it is not surprising to see offshore financial centres competing fiercely for the spoils that QROPS (Qualifying Recognised Overseas Pensions Scheme) offer.
“There are many clients who have benefited significantly from QROPS (and latterly QNUPS) where care is taken to deliver compliant and well structured products from secure and well regulated jurisdictions. It can be argued, Guernsey in particular has led the charge in the jurisdictional stakes; focusing on compliance with HMRC rules and best practice. Guernsey’s Income Tax Authority has played a key role in shaping this through open dialogue with HMRC. In addition, the Guernsey Association of Pension Providers (GAPP) has also had significant influence in defining best practice and protecting the Island’s international reputation. But this dominance is now being challenged following pension reforms in the Isle of Man.
“Tynwald, the Manx Parliament, approved the Income Tax (Pensions) (Temporary Taxation) Order 2010 at its sitting of the 19 October 2010 and the Order came into effect on the 22 October 2010.
“Within the Income Tax (Pensions) (Temporary Taxation) Order 2010, the Isle of Man appears to have created an alternative way of establishing a Manx pension scheme. Instead of simply extending its existing domestic tax approval regime to better accommodate non-domestic applications (ie, QROPS or QNUPS) as other centres have done, the Isle of Man has actually given the offshore trustee or administrator a platform to enable them to decide how they position their scheme, by creating a new tax exemption status for schemes which possess certain characteristics (a third-way if you like). It is this regulatory overview that would seem to be what the Isle of Man government perceives as the Island’s USP, as a ‘third-way’ solution is perhaps more future proofed than constantly seeking to adapt a domestic pensions system in response to changes instigated outside of that jurisdiction.
“The Isle of Man has proved that the QROPS market is maturing and that there remain many valid tangible reasons for undertaking a QROPS transfer, and with over 8,000 QROPS transfers already completed its encouraging that they, like us, see that QROPS is here to stay as a mainstream financial product.
“The Isle of Man is also banking on its belief that a regulated solution is perceived as being attractive to consumers and therefore it appears not to have deliberately changed its pensions regulatory framework, just expanded the tax approval system that sits behind this to provide more flexibility.
“Choice is important as there are so many QROPS jurisdictions out there and having been perceived as potentially missing the boat to other offshore centres in the early years of QROPS, this is a very subtle yet proactive attempt to differentiate the Island in a rapidly changing marketplace. The fact that new options exist can only be good for consumers.
“As for which jurisdiction will become the most sought after jurisdiction for QROPS, well that will ultimately be determined by clients and given the challenges facing world economies and social benefit systems, the race is only likely to hot up.”
D.C.