22/1/2010
By Sophie Baker
An amendment to the tax penalties on alternatively secured pensions (ASP) is necessary to avoid further transfers to overseas pension arrangements, says London & Colonial.
The call comes following figures released by A J Bell which reveal that, in the first two years since A-Day, over 7,300 transfers, representing around £½ bn of UK pension funds transferred to Qualifying Recognised Overseas Pension Schemes (QROPS) to avoid paying an 82 per cent tax on death.
Following a Freedom of Information request made by the SIPP provider, it was found these transfers compare to a meagre 2,320 clients who entered ASPs over the same period.
Chief executive at A J Bell, Andy Bell, said these figures support their campaign to change the rules on tax. "The introduction of this tax penalty in April 2007 resulted in a 154 per cent increase in the amount transferred to QROPS versus the previous year. This is proof that penal tax charges only serve to encourage distortive behaviour at a significant cost to the Exchequer.
"This is only one of the steps being taken to escape this tax charge. The Government now accepts that annuitisation is not compulsory. However the only alternative offered to the majority of responsible pension savers comes with the threat of 82 per cent tax. The few who can afford to, simply move offshore or pay the fees associated with the available onshore structures."
Bell added that the Government is losing around £1million each day to overseas pension schemes, yet seem to ignore the need for reform.
Pressure is increasing for a change, with calls for reform coming from the likes of sales and marketing director at Suffolk Life, John Moret and Adam Wrench, London & Colonial product development manager.
"People do not want to give the tax man the vast proportion of the wealth for which they have saved all their lives, they want as much as possible to go to their dependents. So investors and their advisers are sensibly seeking out alternatives," said Wrench.
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