- The tax recognition test - there are three elements to this test which aims to ensure that the pension scheme is ‘recognised for tax purposes’ under the tax legislation of the country or territory in which it is established.
- The regulatory requirement test - this aims to identify a regulator in the other country that oversees legislation/guidelines that impacts directly on the operation of the pension scheme, to ensure that pension schemes are administered soundly in order to protect members’ interests.
- The pension age test - to ensure retirement benefits are not paid before age 55.
- The benefits tax relief tests - to ensure that any tax treatment of pension benefits is consistent across the scheme for residents and non-residents of the country in which it is established, the scheme must be based in an EU member state or a country with which the UK has a relevant tax information exchange agreement.
Overseas public service pension schemes and schemes set up by an international organisation (e.g. the EU or the United Nations) to provide benefits to, or in respect of, their employees do not have to meet either the ‘Benefits Tax Relief Test’ or the ‘Pension Age Test’ to be a Rops.
Collectively, these conditions aim to ensure the scheme is treated as a pension scheme for regulatory and tax purposes in the country in which it is established and that it is open to residents of the country in which it is based.
The administrator of the scheme must confirm it meets the condition to be a Rops by completing HMRC form APSS251 at outset, and then every five years.
HMRC maintains a list of recognised schemes (Rops list) and will give them a reference number. Inclusion on the list does not mean the scheme is approved by HMRC, nor that it is automatically a qualifying scheme (Qrops).
It is up to the scheme managers of each Rops to ensure their pension scheme continues to meet the requirements to be a qualifying scheme (Qrops).
Transfers to Qrops
A transfer from a UK registered pension scheme to a Qrops is a recognised transfer.
A transfer from a UK registered pension scheme to an overseas scheme that is not a Qrops is not a recognised transfer and will therefore be an unauthorised payment.
The payment will be subject to unauthorised payments tax charges. A charge equalling 40 per cent of the amount transferred is payable by the individual and in some cases, an additional surcharge of 15 per cent will also be levied - again, this is payable by the individual.
