QROPS pensions save expats £1 million a day in tax

British expats who have set up a QROPS offshore pension are saving £1 million a day in tax, according to figures released by the UK government.

Between April, 6 2006 and April 5, 2008 - the latest date that pension figures are available for - the taxman confirm 7,300 pension investors transferred their funds out of the UK in to a QROPS.

The transfers added up to about £0.5 billion in retirement savings.

QROPS transfers were way out in front of the offshore pension transfer race, with the ‘alternatively secured pension’ (ASP) only picking up about 2,000 transfers in the same period.

These statistics are the first solid figures issued about QROPS transfers since their inception in April 2006.

The QROPS data was in response to a freedom of information query from SIPP and SaSS provider AJ Bell.

“The introduction of this tax penalty in April 2007 resulted in a 154% increase in the amount transferred to QROPS versus the previous year,’ said Andy Bell, chief executive at AJ Bell.

“This is only one of the steps being taken to escape the 82% tax charge on the death of an ASP. The few who can afford to, simply move offshore or pay the fees associated with the available onshore structures.

“The current government are losing around £1m each day to overseas pension schemes yet seem ignorant of the need for immediate reform.

“This is proof that penal tax charges only serve to encourage distortive behaviour at a significant cost to the Exchequer. This is only one of the steps being taken to escape this tax charge. The government now accepts that buying an annuity with a pension is not compulsory.”

The figures show that between 3,000 and 5,000 UK pension investors are looking to transfer their funds offshore and that many opt for a QROPS scheme every year.

To set off a transfer, QROPS providers require prospective clients are referred to them by a regulated and independent IFA like QROPS Adviser.

The QROPS Adviser service benchmarks a pension clients current fund performance and then selects an offshore pension that matches the client’s financial and retirement objectives with a list of recommended products from 1,400 or so QROPS schemes on the market.