The UK tax office has failed to achieve it’s projected income, from the surprise new 25% QROPS charge

In 2017 the UK Government made a surprise announcement that a 25% charge on transfers to foreign pension schemes would be implemented. Given the popularity of QROPS (Qualifying Recognised Overseas Pension Schemes), an overseas pension wrapper that allows British expats to remove their pension pot from the UK, this potentially meant huge revenues for the UK tax office.

The 25% charge affects those requesting an overseas pension transfer after 9th March 2017. Potentially it could lead to a massive reduction in those seeking to move their pension pot abroad, as the new tax costs could make it less attractive. Between 10,000 and 20,000 transfers to QROPS are made each year, according to HMRC figures.

As the new policy only applies to pension transfers outside of the EEA, or to jurisdictions where the individual did not relocate and live for at least five years, the Government has fallen well short of its targeted £60m in tax income.

Indeed just 40 of the 4,700 QROPS transfers carried out during 2017/18 had to pay the 25% charge, raising just £1.4m in revenue.

At its peak, QROPS transfers hit 20,100 during 2014/15, with £1.76bn in pension money moved outside the UK. During 2017/18, however, this number was down to just 4,700. An indication that the number of QROPS schemes going ahead has dramatically reduced with the new legislation.

It is likely the new pension freedom laws, which allow easy access to pension cash, have also impacted QROPS sales. One of the most popular reason to move a UK pension abroad, was the ability to cash it in, at a qualifying age. Now that this is also possible in the UK, a QROPS scheme became a less attractive option.

About the author

Trading and Investment

Traded the markets for over 15 years, including Commodities, Bonds, Currencies, Equities, and Indices. I have also worked as a Chartered Financial Planner.
CeMAP, CeFA, DipFA, AdvDipFA, Ba(Hons) Economics, Chartered ALIBF

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