19 January 2010
Resulting from a Freedom of Information request by Sipp provider
AJ Bell, pension savers have transferred nearly half a billion
pounds to qualifying recognised overseas pension schemes (Qrops)
based abroad in an attempt to avoid tax rates of up to 82% on their
funds.
Pension experts warn against using Qrops schemes to avoid UK tax
rates if you have no intention of moving abroad permanently.
Pension experts say that transferring your pension abroad can be
attractive if you are moving to a country which has a more generous
tax regime than the UK. For some jurisdictions this can mean
benefits with lower marginal tax rates, higher levels of tax-free
cash sum, improved death benefits, no compulsion to buy a pension
and freedom to invest in residential property.
However, a more popular motive is to avoid death duties on
pensions. Pension investors reaching the age of 75 must either buy
an annuity or move into an alternatively secured pension (ASP), a
form of income drawdown that restricts the amount of income you can
take. Tax on money that is left in an ASP on death can be as much
as 82%.
The Conservative party has said it will remove the requirement
to buy an annuity at 75 if it wins this year's general
election.
Financial advisers are also warning against using Qrops as tax
evasion schemes and say any companies making bold claims about
"freeing" your pension should be treated with caution and
specialist advice should be sought.
