Ten overseas personal pension schemes have been registered with the Malta Financial Services Authority in recent months, and four more await approval, Matthew Brincat, secretary-general of the Malta Association for Retirement Scheme Practitioners told The Sunday Times.
Malta is coming forward as the number one player for the US market
The development comes largely after HM Revenue and Customs officially approved Malta as a Qualifying Recognised Overseas Pension Schemes (QROPS) jurisdiction in late 2009. This paved the way for pension schemes established in Malta and regulated by the MFSA to be considered for QROPS status under UK law. QROPS enables people no longer resident in the UK to transfer pension benefits accumulated in a UK-recognised pension scheme to another recognised pension scheme outside the country, allowing employers and their employees tax flexibility.
“Over the past two years, there has been increasing interest from retirement scheme practitioners to use Malta as a base for QROPS,” Dr Brincat explained. “The UK generally does not allow pensions to be moved overseas except to jurisdictions approved by the HMRC with a minimised tax burden.”
David Erhardt, a director of STM Malta Trust and Company Management Ltd and Dr Brincat have been instrumental in setting up the association early in the overseas pensions schemes sector’s growth.
Mr Erhardt, the association’s chairman, explained that a EU directive allowing free movement of pension schemes was favourable to Malta. Singapore, Hong Kong and Guernsey had set up frameworks for QROPS; Singapore has, however, been removed from the HMRC list.
Mr Erhardt has chaired an association for pension schemes practitioners in Gibraltar to iron out issues with the HMRC. Practitioners have increasingly been looking to identify an alternative jurisdiction and Malta fit the specifications.
It was held in high regard particularly as the regulator had first negotiated with the HMRC on how the framework should operate and then began to consider applications. Other jurisdictions, he pointed out, had put the cart before the horse and ran into problems.
“There are several other factors which make Malta attractive to practitioners,” he added. “Malta is one of the only QROPS jurisdictions in the EU. There are arguments for EU residents to have access to QROPS because it falls under the bloc’s freedom of movement principles.
“The other is the growing number of double tax agreements Malta has signed, particularly with the US. Malta is coming forward as the number one player for the US market. Numerous parties are examining the potential to register in Malta, especially as regulation here is rigid and there are barriers to entry.”
By establishing an association so soon, Malta-based practitioners are able to self-regulate and ensure all players operate prudently and conservatively within the legislation. It will act as a single body representing the sector in dealings with the MFSA on operational matters, and will also seek to support the regulator in terms of knowledge sharing.
All the administrators which have registered in Malta and those which have filed applications have joined the association. Dr Brincat said the first meeting held in July focused on teething problems faced in a new jurisdiction but proved that practitioners were keen to work to see Malta evolve into a premier pension schemes jurisdiction.
Among the new applicants, Dr Brincat pointed out, is one that could potentially bring the first occupational pension scheme to Malta. The application from a Netherlands-based concern hopes to use Malta as a base to provide pensions for employees in the Netherlands and other EU states.
Mr Erhardt said this will widen the scope of the overseas pensions schemes registered in Malta and there was potential for Malta to also attract pan-European pension schemes. International groups running pension schemes for employees in various countries were looking to centralise schemes and Malta’s cost- and tax-efficient offering could prove attractive.
Despite the encouraging prospects, Mr Erhardt and Dr Brincat do not see Malta’s pension scheme administrator sector growing beyond a small, tight-knit community.
“Isle of Man changed its legislation recently and received around 175 applications in three months,” Mr Erhardt pointed out. “In 18 months, Malta processed around six because the regulation is tighter. We would like to see Malta attract the more prestigious, sound names to register so the risks to the jurisdiction are minimised. Malta will probably not grow beyond 30 or 40 players, but it will no doubt see significant funds under management brought to the island.”