HM Revenue & Customs' sudden removal of all but three Canadian qualifying recognised overseas pension schemes from its official list has sparked warnings of a clampdown on non-compliant Qrops.
Montfort International's Geraint Davies, a financial planner specialising in British expatriates, said a large number of Qrops in jurisdictions around the world were likely to be non-compliant.
He said providers hungry for assets under management were "fudging" the rules, and that too many financial advisers were not doing their due diligence to ensure so-called Qrops were in fact compliant.
Investors transferring to a non-compliant scheme risked facing a 55 per cent tax charge.
Mr Davies warned that HMRC would take a strict approach to transgressors of its rules, saying: "It's either HMRC's way or no way. You simply can’t have rules weaker than a UK registered pension scheme offers."
On 16 November 49 of the 52 Canadian schemes listed on HMRC's "recognised overseas pension schemes" list disappeared, with no explanation offered, leaving providers and advisers in the dark as to what had happened.
Mackenzie Investments, a Canadian pension and Qrops provider, told FTAdviser it had received no explanation from HMRC as to why it no longer considered its Qrops compliant.
HMRC simply informed Mackenzie that it was reviewing "all but one" of the Canadian providers on the list, and would make a final decision in January. Until then, the accounts will be frozen.
Mackenzie would not reveal exactly how much money was held in its Qrops, but said it was "a lot".
According to Mr Davies, the Canadian schemes were removed because Candadian rules allow members to access funds before the age of 55.
Carol Bezaire, Mackenzie's vice-president, tax, estate and strategic philanthropy, said this was correct, but insisted the firm had made special provisions for its Qrops.
"What we do at Mackenzie (and at most of the Canadian companies that have applied for QROPS status) is set up, under our standard Canadian retirement scheme, a “restricted” account which we assign special account numbers to so that we know these are former UK pensions."
She said access is forbidden under the age of 55.
However, she said some former UK residents had intentionally transferred their scheme to Canada prior to age 55, and then tried to convince the company holding the Canadian plan to unlock it.
"We have not at Mackenzie allowed this on any of our plans for any reason," she said.
But Mr Davies said most of the the special restrictions placed on Qrops were a "fudge".
“All the so-called strict rules I have seen are simply a letter the client signs which puts the consumer at risk for any HMRC tax liabilities and are not scheme rules – but a fudge. There is a difference from a client letter which can be over-ridden by primary legislation, and scheme rules."
He accused many Qrops providers of "stabbing the UK financial services world in the back by creative rule twisting".
He said Qrops providers in most countries around the world were likely guilty of this, describing the Qrops world as a "war zone".
He urged expats to seek quality financial advice, warning that this was the only protection against non-compliant Qrops.
He pointed out that HMRC does not vet schemes that list as Qrops, but reserves the right to remove them if it finds they are non-compliant.
A spokesperson for HMRC declined to comment on the specific case, but added: "It is important to note that the list confirms whether a scheme has been notified to HMRC and is qualifying, not whether it is a Rops."
They added that HMRC "does not suspend schemes without contacting them first."
james.fernyhough@ft.com
