QROPS Freedom of information Budget Uncovers Significant Fall in Pension Transfer Charges
In the financial year 2018/2019, the Freedom of information request revealed 24 overseas transfer charges that were paid to HMRC. The total amounted to £760,846. On a comparison of these figures to the financial year before it, there was a decrease in 20% for the transfers. There was also a 46% decrease in revenue. It also revealed that there were 0.5 less QROP transfers.
The above statistics indicate the schemes used by expats moving abroad when transferring their pension from the UK. QROPS in full is the Qualifying Recognised Overseas Pension Schemes. The above release was to show the impact of overseas transfer charges that are applied to the above schemes.
The charge in the 2018/2019 financial year saw the charge levied on 24 transfers that cost £760,846 in tax. This was back in March 2017 when the budget was introduced. It was a reduction compared to previous years. For instance, during the last year, there were 30 transfers which attracted a tax of £1.4 million. This amount was below the government’s expectation.
The QROPS transfer charges only apply for non-residents, if you happen to be a member of the country that you are moving, you won’t be liable for any payments. Please be informed that QROPS is established in a particular European Economic Area (EEA).
What Andrew Tully, the Technical Director at Canada Life had to Say about These Transfer Charges
According to Tully, he said that the QROPS charge had done a commendable job at reducing the movement of pensions outside the UK other than the specified EEA. It has also reduced the number of QROPS transactions by improving the flexibility of how individuals can access their pensions in the UK.
He also observed that the number of pension transfers attracting charges is minimal compared to the number of QROPS. This leads to the raising of a low amount of tax. Nonetheless, the closure of this tax loophole has greatly helped the government prevent another tax leak.
The QROPS Transfer Charge Explained
In March 2017, there was an introduction of a 25% tax charge by the Budget, which was under the chancellor Philip Hammond. The reason for this introduction was to curb the rates at which people were moving their pensions from the UK to other areas. At that moment, the government expected to raise at least £65 million from this move in the current financial year 2017/2018. The stipulated tax charges were specified only for QROP for people living outside the EEA.
The only time when the HMRC observed the highest number of pension transfers was in 2014/2015. This year alone had 20,100 transfers, which attracted a value of £1.76 billion. Thanks to the above regulation, this number has gone down over the years. And in 2018/2019, there were 5,000 transfers which were worth £640 million
If you are a UK resident and are considering a move to another country and wish to move your pensions. You need to consider QROPS. Not unless you are moving within one of the countries in an EEA, your pension might have to be taxed. There are also some scenarios when you might qualify for a waiver. Getting in touch with a financial expert can help clarify what you can do with your pension.