The number of transfers into UK Qualified Recognised Overseas Pension Schemes (QROPS) fell by 12 per cent year-on-year in 2019/20, from 5,000 to 4,400, according to HMRC data.
As reported by our sister title, Pensions Age,the total value of transfers declined by 14 per cent during the same period, from £640m to £550m.
Transfers into QROPS have been continuously falling since their peak in 2014/15, with a particularly sharp decrease since the 2017/18 tax year when a new tax charge was introduced by then Chancellor, Philip Hammond.
The tax charge, introduced in March 2017, subject many QROPS transfers to a 25 per cent charge to discourage transfers from UK schemes where the person is looking to reduce their tax liability by moving their savings to a new jurisdiction.
There are some exemptions to the Overseas Transfers Charge (OTC), such as if the QROPS is resident in the same country as the individual.
In 2018/19, the OTC was applied to 24 transfers and raised £760,846 in tax, according to a Freedom of Information request from Canada Life.
Canada Life technical director, Andrew Tully, said that the OTC had “largely done its job” in quelling the appetite for QROPS transfers.
“Alongside the transfer charge, the ability for people to flexibly access pensions under UK rules may also have had an effect as there are no restrictions after the age of 55, apart from the tax implications of making withdrawals,” he added.
“Transferring pensions under QROPS rules is a very specialist area of the market but there may be limited circumstances where transferring a pension overseas 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.”
The average value of transfers in 2019/20 fell by 2 per cent to £125,000. This is only the second tax year since 2011/12 that the average value of QROPS transfers has fallen.
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