[UK] HMRC's QROPS plan flops

Plans to raise millions from retirement savers via the QROPS overseas transfer charge are a flop, iExpats reports.

A forecast from HM Revenue & Customs predicted a £125million windfall from the charge for the Treasury in the 2017/18 and 2018/19 tax years. Instead, only £760,000 was raised from just 24 savers last year and £1.4million the previous year from 30 transfers.

5,000 retirement savers put £640million into QROPS pensions in 2018/19. Each transfer averaged £128,000. Meaning a mere 0.48 per cent of QROPS transfers in the tax year attracted the charge.

The overseas transfer charge

The overseas transfer charge is paid by expats who move money into an offshore QROPS pension when the scheme is based outside the European Economic Area (EEA) in a place other than their country of residence. (Link via original reporting)

Expats within the EEA may have a QROPS offshore pension based in any EEA state.

A British expat in Thailand who moved their retirement savings to an Australia QROPS, for example, would pay the charge. An expat in Australia putting funds in a local QROPS would not.

The charge is levied as 25 per cent of the value of the funds transferred into a QROPS.

Phillip Hammond - Chancellor at the time - introduced the overseas transfer charge in March 2017 to deter expats from trying to avoid tax by moving their pensions savings between countries.

The decline in transfers to QROPS

The financial firm Canada Life published the figures after it made a freedom of information request to HMRC.

Andrew Tully - Canada Life’s technical director - 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.”