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Hammond budget hits out at QROPS pension transfers
| Published: | 9 Mar at 6 PM |
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This week's 2017 budget is bad news for expats wishing to transfer their pension pots overseas via a Qualified Recognised Overseas Pension Scheme, better known as a QROPS.
Introduced, according to Chancellor Philip Hammond, as a deterrent to tax avoidance, the new rule will come into effect today, March 9 and is not, he said, being seen as a blanket expense for all QROPS transfers. Expat pension savers will not be penalised if they are resident in the country where their chosen QROPS is based, if both the QROPS and the expat are based in the European Economic Area (EEA) or if the pension saver’s employer has provided the QROPS.
The really bad news is that, should a pension saver not fall into any of the above categories, he or she will be hit with a 25 per cent tax charge when the pension is transferred. According to HM Revenue and Customs (HMRC), the charge will fall due and be deducted before the pension scheme transfers the money to an offshore account. The chancellor also made it crystal clear that QROPS pension transfers will be subject to the charge and to UK taxes for a full five years after the date of the transfer, irrespective of where the retirement saver is based.
Hammond stated the new rule supports the government’s wish to promote a fairer tax system as it continues to permit overseas transfers from schemes which have been subject to UK tax relief in spite of the fact that the pension savings will benefit expats now living in new countries of residence. According to HMRC, few QROPS transfers out of the 12,000 to 15,000 per year will be found to be liable for the new charge.
HMRC has estimated it will raise around £65 million from the ‘few’ affected QROPS transfers this year, with the amount soaring to some £315 million by 2022. The transfer charge will also apply to those switching their savings between QROPS pensions, and the tax office is also preparing to tighten the relevant rules for advisors providing QROPS pension transfers to expat retirees. Providers will be forced to certify their QROPS comply with the pension age test, with QROPS offering benefits to pension savers under 55 years of age now outlawed.
Full details of the new rules can be found here:-
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/597643/qrops_guidance.pdf
Source: iExpats
Introduced, according to Chancellor Philip Hammond, as a deterrent to tax avoidance, the new rule will come into effect today, March 9 and is not, he said, being seen as a blanket expense for all QROPS transfers. Expat pension savers will not be penalised if they are resident in the country where their chosen QROPS is based, if both the QROPS and the expat are based in the European Economic Area (EEA) or if the pension saver’s employer has provided the QROPS.
The really bad news is that, should a pension saver not fall into any of the above categories, he or she will be hit with a 25 per cent tax charge when the pension is transferred. According to HM Revenue and Customs (HMRC), the charge will fall due and be deducted before the pension scheme transfers the money to an offshore account. The chancellor also made it crystal clear that QROPS pension transfers will be subject to the charge and to UK taxes for a full five years after the date of the transfer, irrespective of where the retirement saver is based.
Hammond stated the new rule supports the government’s wish to promote a fairer tax system as it continues to permit overseas transfers from schemes which have been subject to UK tax relief in spite of the fact that the pension savings will benefit expats now living in new countries of residence. According to HMRC, few QROPS transfers out of the 12,000 to 15,000 per year will be found to be liable for the new charge.
HMRC has estimated it will raise around £65 million from the ‘few’ affected QROPS transfers this year, with the amount soaring to some £315 million by 2022. The transfer charge will also apply to those switching their savings between QROPS pensions, and the tax office is also preparing to tighten the relevant rules for advisors providing QROPS pension transfers to expat retirees. Providers will be forced to certify their QROPS comply with the pension age test, with QROPS offering benefits to pension savers under 55 years of age now outlawed.
Full details of the new rules can be found here:-
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/597643/qrops_guidance.pdf
Source: iExpats
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