Mario Vitanelli is a freelance writer and blogger who specializes in international politics and finance, retirement and investment. His areas of expertise include European, Asian and Latin/South American economic policy and QROPS. When away from his keyboard, he enjoys photography and appreciates the rest of the Vitanelli family’s endless patience with his football dependence.
The Bailiwick of Guernsey had been a Qualified Recognised Overseas Pension Scheme (QROPS) star since QROPS were brought into being in 2006. Always among the top three most popular providers, by late 2010 Guernsey had handily taken crown as most popular QROPS destination in the world. It’s a position they kepy until May 2012 when the whole of the QROPS financial industry was dealt a shocking surprise. HM Revenue and Customs (HMRC) passed Statutory Instrument 1221 (SI 1221), which ruled that Guernsey could not offer preferential tax rates to non-residents and any QROPS in violation was to be disavowed.
Of Guernsey’s 313 qualified QROPS-providers, SI 1221 left 3 intact. 99 percent of current business, and by most accounts at the time, 100 percent of future business had been shattered away. Literally overnight (the night of May 25, 2012) Guernsey’s QROPS economy was, for all intents and purposes, finished. As more British expat pensioners had laid their nest eggs in Guernsey than anywhere else, the collapse came as an understandable shock, and one felt well beyond Guernsey. If the most popular, established and trusted destination for QROPS investment was so vulnerable, how safe could the rest of the industry be and where would expat pensioner investors feel comfortable caching their money?
In short order it became apparent Malta was the answer to the latter part of that question. Malta secured their position at the top of the heap by specifically tailoring their economy and its foreign relation policy to accommodate foreign investment, QROPS and QNUPS (Qualified Non-UK Pension Schemes) in particular. They did so by rigorously adhering to HMRC’s new regulation and seeking out double taxation agreements (DTAs) with (at the time of this writing) 67 other nations, including those most popular with British retirees.
Beyond the specific draws of favorable (rock bottom) tax rates and its DTAs, Malta benefits from some more systemic benefits. It’s a stable member of the EU, with all the economic stability that membership entails. That’s certainly a draw. And unlike fellow EU member Cyprus, Malta’s banks have an earned historical reputation for being pragmatic, conservative and avoiding risky borrowing and investing. Malta’s central banks hold assets that are 223% of Malta’s GDP. While that may seem like a lot, it’s not. Financial polestar Great Britain’s core banks hold 492% of their GDP; Cyprus’s core banks held well over 700% before their crisis; Iceland was pushing well over 800% before theirs and Scotland carries a disquieting 1254%.
All of that is good news for Malta QROPS investors but like any complex financial situation- there is no universal answer for all investors. There are some drawbacks to a Malta QROPS too. For instance, by Maltese law any trustee of a retirement or pension scheme is allowed to entrust investment powers to an investment advisor or scheme manager but that trustee remains legally responsible for the activity, wrongdoing and omissions of that investment advisor. Which is why it’s very important for anyone considering a QROPS in Malta to be quite careful when choosing a scheme, do a great deal of research and get the advice of a trusted financial professional.
Additionally- the DTAs generally mean a great tax arrangement for the QROPS holder… but not always. Some of the tax agreements require that residents with a Malta QROPS pay taxes that are shared between the two nations. This is true of India, Barbados, Norway, Singapore, Jordan, Lithuania, Singapore, Latvia and Estonia. Those retiring to Ireland, Hong Kong, South Africa or South Korea have DTAs that don’t include reduced or nonexistent taxes. Finally, if one were to settle in a nation which hadn’t signed a DTA with Malta, they’d pay anywhere from 15-35% on their pension income.
Basically, the same rules apply to Malta that apply to any other major financial undertaking: details are going to differ for everyone- there’s no magic bullet. What your particular details will reveal about the best choice you can make regarding retirement and pension investing are best brought to light through a great deal of research and the aid of a trusted retirement investment/QROPS specialist.