Offshore pensions set for severe restrictions following Brexit: AJ Bell
The UK government could severely restrict how offshore pensions are used by expats living outside of the UK, following Brexit, and in turn boost Treasury coffers, according to online investment platform provider AJ Bell.
In a statement released today AJ Bell said that it is in the UK government’s interests to restrict Qualifying Recognised Overseas Pension Schemes (QROPS) in the wake of the Brexit vote. QROPS were created in April 2006 in response to EU freedom of movement legislation.
It said that the UK government has stated on a number of occasions that the rules were designed to allow individuals who moved overseas to transfer their pension into the country where they now resided.
However, under existing rules, UK citizens can transfer their savings to a jurisdiction of their choosing – even if they don’t live there. Many people move to one European Union country but transfer their pension assets to another in order to minimise their tax bill, the statement said.
And with the recent vote for the UK to leave the EU, AJ Bell believes that the government may consider restricting this practice, perhaps by insisting that pensions can only be transferred to a country where an individual is resident.
AJ Bell senior analyst Tom Selby said that he believes that it is in the UK government’s interests to restrict QROPS in the wake of the Brexit vote. He believes that the new UK chancellor will be “sorely tempted” to adjust legislation in “any way” that encourages savers to draw their pension in the UK.
‘Boost to Treasury coffers’
“One of the primary reasons people transfer to a QROPS is to pay less tax than they would under UK rules,” he said. “Placing restrictions on some transfers would mean more savers would leave their pensions in the UK, providing a welcome boost to Treasury coffers.
“Pension money that stays in the UK is potentially subject to a number of tax charges, including income tax and potentially lifetime allowance penalties. By shifting their pension overseas individuals can potentially pay little or no income tax at all on their fund.”
AJ Bell is a provider of online investment platforms and stockbroker services in the UK, with assets under administration of £28bn and more than 131,000 clients. It also provides third party SIPP administration services for Barclays Stockbrokers, Halifax Share Dealing, Old Mutual Wealth and TD Direct.