In this piece written exclusively for International Investment Matt Dean, managing partner, Hoxton Capital Management UK, explains the implications Brexit will have on a Qualifying Recognised Overseas Pension Scheme (QROPS).
Since 9 March 2017, transferring a UK pension to a QROPS has become a far less attractive proposition for expats living outside the European economic area. From the moment the Chancellor of the Exchequer brought in the overseas pension transfer charge, those residing outside of Europe who transferred to a QROPS became subject to an immediate tax charge of either 25% or 55% depending on certain conditions.
For expats based in Europe, a QROPS is currently an attractive option for individuals who have pension assets approaching the lifetime allowance tax limit in the UK. QROPS remain an option under the EU's freedom of movement of capital principle and are likely to remain possible throughout 2020. However, how things pan out is ultimately still speculation at this point, as it is still unclear what the relationship between the UK and the EU will look like by 31 December this year.
For expats based in Europe, a QROPS is currently an attractive option for individuals who have pension assets approaching the lifetime allowance tax limit in the UK."
It is likely that the UK government will move to implement the same rules to pension transfers for individuals based in the EU once Brexit is complete, ultimately aiming to keep UK pension assets within the UK financial system. Naturally we will be watching to see how this develops throughout the year, but it does seem likely that there is a time limit for EU based individuals to relocate their UK pension assets into Europe with them.
Matt Dean is managing partner at Hoxton Capital Management UK