The UK Chancellor of the Exchequer Philip Hammond is letting pension scammers “off the hook”, by targeting “legitimate firms with bona fide, compliant products,” according to a UK pensions campaigning group.
Online financial services activists Pension Life, has hit out at the UK government following the Chancellor’s shock Budget announcement that, as reported, a 25% charge on transfers to qualifying recognised overseas pension schemes (QROPS) has been introduced.
Pensions Life is an online blog and support service that was set up to “identify and prevent pension scams, close loopholes in pension law and rescue victims of pension fraud”, according to its website.
Angela Brooks, chair of Pension Life, has reacted angrily to the recent QROPS charge and said that seeing that Hammond has already done “one screeching Budget U-turn” he should now do another on his “wholly ill-conceived and utterly misguided thinking on QROPS”.
“What does slapping a 25 per cent tax on QROPS transfers achieve?,” she said. “Primarily it disadvantages many genuine pension savers who are using bona fide, regulated advisers and who want to benefit from the advantages that transferring their UK pensions out of Britain can offer.
“The uncertainty over an individual’s possible future domicile outside the European Economic Area (EEA) – triggering the 25% tax charge – has put a large question mark over pension and tax planning for many people.”
Brooks points that a person who transfers into a European QROPS while domiciled in the EEA and who is then offered a lucrative job outside the EEA may then find they cannot afford to take the job and might be better off remaining where they are and taking a low-paid job to avoid triggering the tax charge.
“In addition, the issue of double tax treaties has been ignored/overlooked altogether,” she added.
“The QROPS tax seems designed to collect a large basket full of low-hanging-fruit tax, but without addressing the ills of some within the offshore pension industry: namely, the armies of firms operating without regulation and the large number of trustees accepting business from them without due diligence.
“Hammond is also ignoring the scourge of the many toxic UCIS funds being promoted to UK residents illegally, and partnered with QROPS.”
Brooks called for the UK government to work with regulators, ombudsmen and financial crime units in the most popular QROPS destinations, to “clean up” the offshore industry in the interests of British expats.
She called for “urgent protection” by regulators against offshore firms which purport to provide advice covered by the FCA, but which actually operate under offshore regulation “unbeknown to the client” – who, she says, only finds out “once things go wrong”.
“This move by Hammond is to bolster the government’s coffers and does absolutely nothing to address the real problem of pension scams on British expats,” added Brooks. “While there are many regulated, well-run and responsible firms operating in the international space, unfortunately, there are others that use highly questionable practices and products – as well as outright scams.
“He [Hammond] is letting pension scammers off the hook by targeting legitimate firms with bona fide, compliant products.”