HRMC QROPS Tax Windfall Transfer Charge Flops

The British taxman’s cunning scheme to grab millions of pounds from British retirees transferring their pensions to an overseas QROPS is now officially an almost complete failure.

When the tax-grabbing scheme was first announced, HMRC gave an estimated windfall figure of around £125 million, raised from estimates of transfers in the 2017-18 and 2018-19 tax years. In reality, tax income from the scheme raised just £760,000 from 24 savers last year, and £1.4 million from the 30 transfers made in the previous year. The total numbers of transfers from pensions to QROPS made by 5,000 British retirees during 2018-2019 amounted to £640 million, with an average per transfer of £128,000, meaning only 0.48 per cent of all transfers were liable for the charge.

The vastly unpopular transfer charge can only come into force if British expats move their savings into an offshore QROPS based outside of both the saver’s present country of residence and the European Economic Area, meaning UK expats living in EEA states are allowed a QROPS based in any other EEA state without falling foul of the transfer charge. Given the recently-revealed lack of revenue from the charge, it can’t have taken long for expat IFAs to advice their clients on how to legally avoid gifting the British taxman some 25 per cent of their pension savings. T

he figures themselves were obtained by insurers Canada Life via a freedom of information request sent to HMRC, with the company’s tech director telling reporters it seems the hated charge has now limited retirees’ appetite for moving their pension savings outside the EEA. In addition, he added, it seems it’s also caused a general decline in the numbers of those who decide to transfer their savings to a QROPS, as there’s now more flexibility as regards getting access to pensions still held in the UK.