QROPs on the decline due to new 25 per cent transfer tax

The latest round of statistics published by the UK’s HRMC has shown a significant drop in the number of QROPS transfers taking place.

The March 2017 introduction by HMRC of a 25 per cent transfer tax on QROPS pension transfers is believed to be the reason why the numbers of such transfer have fallen. Basically, the tax has negated a good number of the advertised financial benefits of QROPS schemes, and applies to any UK pension transferred to a jurisdiction which is not the investor's country of residence.

Even so, in spite of the tax, thousands of Britons are still attempting to find a way to get their hands on their own money without getting ripped off by HMRC, which happily admits the tax was introduced to keep expat Britons’ cash in the hands of UK financial entities.

During the last tax year 2016/2017, 9,700 QROPS with a total value of £1.2 billion were completed, a drop from the previous tax year of 13,700 transfers valued at the same amount. The current tax year’s figures are widely expected to see further and sharper falls, mirroring the decrease of QROPS freedom of choice available to British pension holders.

Basically, unless the EU or Malta with its single QROPS scheme is your country of retirement, there are few viable and beneficial QROPS now available. If you’re a British expat living in the USA with a pension remaining in the UK, you simply do not have any access to QROPS.

However, the present scenario with its almost total downsides for retirees wishing to retire overseas doesn’t seem to have dampened enthusiasm for transfer options. One reason could well be the growing pension deficit causing reductions in pension income as well as other newly imposed restrictions.

British retirees who’ve spent their entire working lives paying into a defined benefit scheme could well be forgiven for wanting out of the UK and taking their cash with them. One solution for those now living in the USA is a Self-Invested Personal Pension (SIPP), giving similar freedoms to a QROPs and extended freedoms in personal choice as regards investments.

SIPPs can either be managed by an investment professional or by the holder, but the do-it-yourself option requires a certain level of professionalism investment-wise and the investment manager option requires a totally trustworthy IFA. Expat pensioners, wherever they’re located, could now be forgiven for suspecting they’re stuck between a rock and a hard place pension-wise.