Chancellor Philip Hammond’s introduction of a 25 per cent tax on transfers to Qualifying Recognised Overseas Pension Schemes (QROPS) is “wholly ill-conceived”, Pension Life has claimed.
According to the pensions campaign group, Hammond should progress with another U-turn on the introduction of an additional charge to QROPS transfers. The additional tax will disadvantage many pension savers who are using regulated advisers and who want to benefit from an overseas pension.
In addition, it doesn’t stop any of the current scammers using QROPS as a vehicle for their scams, Pension Life noted.
Instead, Pension Life chair Angela Brooks has suggested that Hammond should be looking to work with regulators, the Ombudsmen and financial crime units in popular QROPS locations to “clean up the offshore industry”. This is increasingly significant as the potential costs to the state of all victims of negligent advice “when they have to return to the UK and depend on benefits will be enormous,” she added.
“This move by Hammond is to bolster the government’s coffers and does absolutely nothing to address the real problem of pension scams on British expats. Whilst there are many regulated, well-run and responsible firms operating in the international space, unfortunately, there are others that use highly questionable practices and products - as well as outright scams.”
The charge has also put a considerable “question mark” over tax and pension planning for many people, the group found. One example being: “A person who transfers into a European QROPS while domiciled in the EEA and who is then offered a lucrative job outside the EEA may then find they cannot afford to take the job and might be better off remaining where they are and taking a low-paid job to avoid triggering the tax charge.”
Brooks concluded: “Hammond has ignored the multitude of issues that he ought to be addressing to protect British expats and prevent pension fraud. He is letting pension scammers off the hook by targeting legitimate firms with bona fide, compliant products.”