On Wednesday 7th January the Malta Financial Services Authority (“MFSA”), the Maltese regulator, issued new and amended rules relating to pension schemes, pensions funds, their administrators and third-party service providers. This announcement was envisaged before Christmas 2014, but appears to have been delayed due to the announcement of a fresh Statutory Instrument by HMRC, issued on 19th December 2014. We communicated this here.
The changes, which take immediate effect, reflect significant consultation with the Pensions Industry in Malta over the last 12 months. Full results of the consultation, including MFSA commentary, can be read here.
Amongst the key changes, which are still subject to the issue of detailed guidance notes, are:
- Retirement Benefits paid under Defined Contribution Schemes availing of the Programmed Withdrawal Regime will be limited to Schemes that DO NOT have QROPS status. We welcome this change in removing the ability of Pension Trustees to liberally interpret the previous rules. This may mean that some current Schemes may need to de-register under QROPS and structure new Schemes.
- Investment liberation – Member directed investments will now be allowed, together with the ability to acquire UK Commercial Property, and gear it up to a reasonable level (50%).
- Regulation of Advisers and Investment Managers – the notes suggest that there will be a need for Pension Trustees to deal with Advisers who are regulated up to a standard satisfactory and acceptable to the MFSA. Likewise, Investment Managers or Discretionary Fund Managers will need to be regulated in Malta or more relevant, have to be passported into Malta
- Retirement age – this has been increased to at the latest 75 years of age.
- Procedural – there are some changes proposed relating to the need for Members to execute certain documents – Deeds, Investment instructions. We will analyse this further and will issue instructions in due course.
UK Pensions Freedom and Flexibility
Schemes which are registered as QROPS will not be restricted by Malta regulations in terms of benefit provision and will be able to provide benefits in line with HMRC regulations. Consequently full flexibility will be allowed from Malta pension schemes from April when the new UK regulations are effective.
Most if not all of the proposed changes are welcome, and from a QROPS perspective they reinforce the Statutory Instrument issued by HMRC in December 2014. There may be some further guidance notes issued on various points over the coming months and we will keep you informed.
There will be a transitional period to come in line with the new UK provisions and the MFSA will be issuing a statement in the near future on this. Momentum will, as appropriate, issue instructions to our advisers on any changes needed to our procedures.
Momentum – the need for choice.
Positively, the above announcement on Wednesday following the HMRC announcement in December removes any outstanding uncertainty around QROPS. The continued benefits of QROPS remain.
- 30% Pension Commencement Lump Sum.
- Zero Death Tax.
- Ability to minimise the impact of the life time allowance.
- Pension benefits in the currency of choice.
Notwithstanding this, the absolute need for flexibility in jurisdictional choice remains critical. Momentum Pensions are able to deliver a solution across all three key QROPS jurisdictions together with the provision of a UK SIPP and are able to offer free switching between jurisdictions should client circumstances change.