Policy paper

Qualifying recognised overseas pension schemes regime

Published 8 March 2017

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This publication is available at https://www.gov.uk/government/publications/qualifying-recognised-overseas-pension-schemes-charge-on-transfers/qualifying-recognised-overseas-pension-schemes-regime

This is a note setting out the government’s views on the tax treatment of the regime for transferring UK pension savings to qualifying recognised overseas pension schemes (QROPS).

Chapter 1 the QROPS regime

The government provides generous tax relief on pension savings in UK registered pension schemes.

Those pension savings can be transferred free of UK tax - up to the lifetime allowance, currently £1 million - to a QROPS.

A QROPS is a pension scheme established outside the UK that is broadly similar to a UK registered pension scheme.

The criteria for what makes a foreign pension scheme similar to a UK registered pension scheme for the purposes of a transfer are set out in UK legislation.

Transfers to QROPS

The government allows transfers to QROPS to be made free of UK tax because they enable people permanently leaving the UK to take their pension savings with them to their new country of residence. This is intended to enable them to continue to save to provide for themselves when they retire.

The government recognises that QROPS continue to have a legitimate purpose. However, the QROPS regime is increasingly marketed and used as a way of gaining an unfair tax advantage on pension savings that have had UK tax relief.

This is contrary to the policy rationale for allowing transfers of UK tax-relieved pension savings to be made free of UK tax to QROPS.

Government action

From 9 March 2017 changes with apply so that there will be a 25% tax charge on a transfer to a QROPS unless people:

  • take their pension savings with them to their new country of residence
  • move to a different country to their pension savings but both are within the European Economic Area
  • transfer to a QROPS provided by their employer in respect of their current employment

The government will continue to monitor the regime to ensure it is working as intended.  

What the government expects

The government expects that individuals will be aware of the new tax charge that can apply to transfers to QROPS requested on or after 9 March 2017, and continue to:

  • use the QROPS regime to transfer their pension savings where they leave, or intend to leave the UK permanently so that they can continue to save for when they retire
  • be aware that UK tax rules continue to apply to pension savings transferred from a UK pension scheme and that UK tax charges can arise in relation to the transfer
  • engage with HM Revenue and Customs (HMRC) where necessary and pay any tax charges that arise

The government expects that scheme administrators of registered pension schemes will be aware of the new tax charge they may have to deduct from transfers to QROPS requested on or after 9 March 2017.

The government expects that scheme managers of QROPS will be aware of the new tax charge they may have to deduct from transfers to other QROPS requested on or after 9 March 2017 and continue to:

  • ensure they meet the conditions to be a QROPS before notifying HMRC
  • ensure they continue to meet the conditions when accepting transfers from UK registered pension schemes
  • provide the information required and engage with HMRC where necessary
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