Transferring your pension overseas

By Tom McPhail | 02 Jul, 2008 

We have been seeing persistent stories in the press in recent weeks, about UK pension investors transferring their pension fund overseas. Allegedly this is being done to escape from HMRC, with a view to circumventing the British laws on withdrawing investments from a pension fund.

Since April 2006, it has been possible to transfer your pension rights to a Qualifying Recognised Overseas Pension scheme (QROPs); typically this is done when investors are emigrating.

This is an area of business we have commented on in the past, and the latest announcement from HMRC confirms our view that investors should only look to transfer their pension benefits overseas if they have a legitimate reason for so doing. HMRC has confirmed that "HMRC is monitoring those schemes registered as QROPs and transfers to QROPs closely and will take appropriate action against any abuse it finds. If a scheme is not a QROPs, transfers from UK registered schemes out of UK tax-relieved funds will not be recognised as transfers and will attract a tax charge.”

We have seen in the past that HMRC doesn’t have much of a sense of humour over this kind of issue, so their warning should be taken seriously. It probably isn’t a coincidence that all Singapore based QROPs have recently been removed from HMRC’s approved list.

For investors who are genuinely emigrating, and who simply want to draw their retirement income in another country there shouldn’t be any problems. For anyone looking to circumvent UK legislation by moving your pension off-shore, it’s probably not worth the risk. Hargreaves Lansdown are not tax experts however and if you are at all concerned you should seek the advice of a qualified tax specialist.