25% Levy for Overseas Pension Transfers a Failure

Around 4,700 qualifying recognised overseas pension scheme (QROPS) transfers were carried out during 2017/18. Of these, only 30 transfers were required to pay the 25% Overseas Transfer Charge (OTC) that was introduced in March of 2017. Her Majesty’s Revenue and Customs had predicted £65 million in tax revenue from the tax, however, only £1.4 million has been raised since the enactment of the charge.

The 25% OTC was introduced by chancellor Philip Hammond during the March 2017 Budget. The intention of the OTC was to discourage UK citizens from transferring their pensions to an overseas scheme to take advantage of tax breaks and other benefits. The OTC is a levy and is generally not tax deductible.

 Although transfer volumes  have dropped, the tax has failed to raise the revenue it was designed to bring in, because it has in effect stopped pension holders having the ability to transfer at a reasonable cost. New pension freedoms also may have contributed to the decline in overseas pension transfers, as pension holders are now able to access their UK pension pot earlier and more easily although tax implication may apply.

Currently, transferring your UK pension to New Zealand does not incur the 25% charge if you are resident in New Zealand. However, with the failure of this charge in collecting the intended tax revenue, further changes overseas pension transfer costs could be a possibility.

 If you are a New Zealand resident and have been considering transferring you UK pension to New Zealand, such regulations could impact your pension transfer to an NZ scheme. To start your pension transfer, get in touch with us by filling in this enquiry form.

 Ranfurly Strategic offer a listed Superannuation Scheme, as well as an agent that can assist you through the transfer process, prepare transfer forms, and assist in obtaining the required UK and NZ advice that you need. The Ranfurly Scheme is listed on the UK Government Recognised Pension Schemes List.

For the full article by Kirsten Hastings, please refer to International Adviser.