The number of transfers into Qualified Recognised Overseers Pension Schemes (QROPS) has dropped for the fifth year in a row dropping 12% on figures.
According to the UK'slatest HMRC statistics, published this morning transfers dropped from 5,000 in 2018-19 to 4,400 in 2019-2020. This is coupled with a 14% drop in the amount of cash transferred to £550m.
The stats, pictured in the graph below, show a dramatic decline from the busiest period for transfers in 2015 where the numbers topped 20,000 in one year. The numbers have plummeted since since, particularly following the the introduction of a 25% tax charge in March 2017.
Moving assets into a QROPS can still offer useful flexibility, especially for those people planning to leave the UK permanently that want to simplify their finances by taking their pension with them," Jon Greer, Quilter
This further disincentivised pension holder to transfer overseas, a measure introduced to deter transfers to overseas schemes purely for a tax gain.
However, Jon Greer, head of retirement policy at Quilter, said that while QROPS transfers are continuing to drop, there is a still a market for the right scheme for the right investor.
"The QROPS market has continued its steady decline in the past year, with the total value of transfers down another 14% in 2019/20, with the average transfer value falling to just under £125,000," he said.
"Moving assets into a QROPS can still offer useful flexibility, especially for those people planning to leave the UK permanently that want to simplify their finances by taking their pension with them.
"At the moment the rules refer to the EEA regarding exemptions from the 25% tax charge, meaning no tax applies on a transfer to another scheme within the EEA. The situation will become clearer following the end of the Brexit transition period."
The market peaked in 2014/15 following the introduction of pension freedoms with more than 20,000 transfers to overseas schemes, during this time, Greer points, that thousands opted for the flexibility of a personal pension and sought to transfer out, with the overseas market experiencing a ripple effect as a result.
"Since then, the market has shrunk considerably but now appears to be levelling off as in 2019/20, there were just 4,400 transfers and only 5,000 in the previous year.
"This decline is largely down to a reduction in the amount of defined benefit pension transfers taking place thanks to increased scrutiny and the increased costs that advisers face to participate in the defined benefit transfer market.
"It is also a requirement to obtain advice from a UK regulated pension adviser, who has the relevant regulatory permission to advise on such transfers," he added.