A lot of Britons save into their pension in preparation for retirement overseas. This is made possible through a qualifying recognised overseas pension scheme (QROPS) that is available around the world. Following HMRC’s publication of an updated list, however, the number of QROPS available to savers has been significantly reduced.
The Australian scheme, for example, used to be 1,600 but is now reduced to 1. The Swiss schemes have gone from 100 to 1, while the French scheme has fallen from 34 to 4. What used to be around 3,800 schemes available for British savers has now been reduced to just around 600, which is drastic change by anyone’s standards.
These changes not only limited QROPS options for Britons but also come at a cost. Because any saver who would transfer their pension to a scheme that is not included in HMRC’s updated list would have to pay 55pc tax charge on the money in their pension pot. This also means pensioners no longer have full control over where they wish to retire overseas unless they risk paying the tax charge.
And, as much as people would like to think that they can get away with it, HMRC has already informed overseas schemes that they must comply with the newly enforced pension freedom rules, which states that members are prohibited from accessing their savings until they reach the age of 55. The only exception is when early retirement is because of health problems.
Anyone who transferred their pension before 6 April may be exempt from the 55pc tax charge, according to James McLeod of financial advice firm AES International. The Australian Treasury is said to be negotiating relief for transfers as well, allowing an exemption for those who transferred after 6 April, but not after 17 April.
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