By Lou Cunningham, Partner, Blevins Franks
In December HM Revenue & Customs issued a draft statutory instrument which proposed removing the ‘70% rule’ on QROPS (where 70 per cent of the funds should provide an income for life) from April.
However, in mid-March HMRC confirmed that the rule will remain in place for now, which means many QROPS cannot provide full flexibility on withdrawals. This is temporary, but there was no indication of a time scale.
This 70 per cent rule does not apply to EU schemes. So QROPS in, for example, Malta, can offer the new pension flexibilities.
From April 2016, pension freedom will be extended to people who have already bought an annuity.
Retirees will be able to sell the income they receive from their annuity and have the freedom to use the capital as they wish – so they could take it as a lump sum, or place it in drawdown.
Scam proof your pensions
The UK Pension Regulator launched a campaign warning people not to get stung by pension scams, which are on the increase following the new freedom.
Scammers try to lure members with promises of one-off investments, pension loans or upfront cash.
They may try to flatter and tempt you into transferring into an investment with guaranteed returns.
Once the transfer has gone through it is too late. You need to be wary of cold calls; promises of returns of over 8%; proposals to put money into a single investment and claims you can access your pension before age 55.
The FCA also stepped up consumer warnings and launched a ‘ScamSmart’ campaign amid growing fears that retirees will fall victim to fraudsters or make poorly informed decisions. Pension savers face new risks with new complex and difficult to compare products. Those who have not taken proper advice could lose out from providers shielding them from the full range of options.
This is a reminder of how important it is to take regulated, professional advice on your pensions. You need to be extremely careful about what you do with your fund. Just because pension freedom exists, does not mean you have to use it. Take the time you need to research all your options, understand the pros and cons and weigh them all up. You may be able to benefit from the new regime, particularly with the beneficial Cyprus tax regime, but take expert and personalised advice.
Learn more about BLEVINS FRANKS HERE