Tax income on QROPS transfers well below govt estimate

The amount of tax received on pension transfers from UK pension schemes to Qualifying Recognised Overseas Pension Schemes (QROPS) in 2018/19 was way below government estimates, Canada Life has revealed.

QROPS are used by people who are moving abroad and looking to transfer their UK pension scheme.

According to a Freedom of Information request, there were 24 overseas transfer charges paid to HMRC in 2018/19, worth £760,846, representing a 46 per cent fall in revenue and a 20 per cent reduction in transfers compared to 2017/18.

Government figures suggested that the tax on these transfers would raise £65m for the Exchequer in 2017/18 and £60m in 2018/19.

In the March 2017 budget, then-Chancellor Phillip Hammond introduced a 25 per cent tax charge on transfers to QROPS in countries outside the European Economic Area (EEA), hoping to discourage transfers from UK schemes where the person is seeking to reduce their tax liability by moving their pension wealth to a new jurisdiction.

Commenting, Canada Life technical director, Andrew Tully, said: “It looks like the QROPS charge has done the job in limiting the appetite for moving pensions outside the UK to destinations other than the EEA.

“The pension freedoms will also have had an effect in the general decline in the number of transfers to QROPS, simply because of the greater flexibility in how people can access their pensions in the UK.

“The number of pension transfers attracting a charge is a very small proportion of the overall number of transfers to QROPS, and as a result the amount of tax raised is very low.

“However, I’ve no doubt the Treasury will be pleased another tax loophole has effectively been closed and further tax leakage prevented.”

In total, less than 0.5 per cent of QROPS transfers attract a charge, with 24 out of 5,000 transfers, worth £640m, incurring a charge in 2018/19.

    Share Story:

Recent Stories


A changing DC market
In our latest Pensions Age video interview, Aon DC senior partner and head of DC consulting, Ben Roe, speaks to Laura Blows about the latest changes and challenges within the DC sector

Being retirement ready
Gavin Lewis, Head of UK and Ireland Institutional at BlackRock, talks to Francesca Fabrizi about the BlackRock 2024 UK Read on Retirement report, 'Ready or not. How are we feeling about retirement?’

Podcast: Who matters most in pensions?
In the latest Pensions Age podcast, Francesca Fabrizi speaks to Capita Pension Solutions global practice leader & chief revenue officer, Stuart Heatley, about who matters most in pensions and how to best meet their needs
Podcast: A look at asset-backed securities
Royal London Asset Management head of ABS, Jeremy Deacon, chats about asset-backed securities (ABS) in our latest Pensions Age podcast

Advertisement Advertisement