Transfer charge ‘quells’ appetite of people wanting to move pension under QROPS arrangement

The number of pension transfers to QROPS remained relatively flat in the 2018/19 tax year at 5,000 transfers (up 6%) worth a total of £640m (down 14%) compared to the previous tax year (4,700 transfers worth £740m), highlighting the effect that the QROPS charge has had.

In the March 2017 Budget, then Chancellor Philip Hammond introduced a 25% tax charge for qualifying pension transfers. The charge was applied to 30 transfers in the tax year 2017/18 raising tax of £1.4m. It was hoped the introduction of a charge would discourage transfers from UK schemes where the person is seeking to reduce their tax liability by moving their pension wealth to a new jurisdiction.

Today’s figures published by HMRC, according to Canada Life technical director Andrew Tully, show that the transfer charge has “quelled the appetite of people who may have been considering moving their pension under a QROPS arrangement”.

“The ability to flexibly access pensions under UK rules may also have had an impact as effectively there are no restrictions after the age of 55, apart from the obvious tax rules,” he said.

“There may be limited circumstances where transferring a pension overseas, even with the 25% tax charge, can make sense. This is where seeking specialised financial advice is critical to ensure all relevant rules are adhered to from both a UK perspective but also for the receiving arrangement. An adviser will also ensure you will not fall prey to the ever present scammers.”

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