Some UK pension savers who were stung by a 25% charge for transferring their pots to a qualifying recognised overseas pension scheme (Qrops) now have a set of instructions about how to get that money back if their circumstances have changed.
The shock charge was sprung on an unsuspecting pensions industry in Philip Hammond’s 2017 Spring Budget.
It came into effect almost immediately, giving firms and individuals very little time to adjust.
Industry reaction at the time viewed it as a shutting down of the Qrops market, with HMRC figures indicating that this has, pretty much, been the case.
Who can claim?
But there is a provision where a change of circumstances within five tax years of a transfer being made can trigger a repayment.
David White, managing director of QB Partners, outlined a couple of scenarios to International Adviser.
“An individual who moved to a country outside the European Economic Area but has now moved to a country within the EEA, within five tax years of the date of the transfer, is eligible.
“Also, someone who moved outside the EEA and transferred to a Qrops in another jurisdiction but then moves to a country, such as Australia, and transfers to a local Qrops can also make a claim,” he said.
The HMRC guidance is also for those for whom the overseas transfer charge was deducted in error, although White expects the impact of this “to be minimal”.
“People who have transferred to a Qrops and incurred the overseas transfer charge will need to be aware of any change in their circumstances which leads to them meeting an exemption and the timescale that they must meet if they wish to reclaim the charge.
“Ongoing financial advice would help with this.”
Step-by-step instructions
In a document published on 8 April, HMRC outlined the steps individuals need to take to make a claim.
It needs to be in writing, using the relevant format and made by the person who paid the charge. Included must be the scheme member’s name, date of birth and principal address.
Other relevant information:
- National Insurance Number (or statement that the member does not have one);
- Date of the transfer and date of the event triggering the charge;
- Amount of the transfer;
- Date the charge was paid to HMRC;
- Circumstances giving rise to the exclusion of the charge;
- Date relating to the change in circumstances; and,
- Value of the claim.
The changes will come into effect on 25 April 2019.
Paying the charge
The government confirmed that there were a number of exemptions to the 25% charge, when it made the announcement in 2017.
The key one was where the pension holder and pot would both relocate to the EEA, meaning an individual could move to Germany and have a Malta-based Qrops without incurring the charge.
Other exemptions include where:
- both the individual and the Qrops are in the same (non-EEA) country after the transfer;
- the Qrops is an occupational pension scheme sponsored by the individual’s employer;
- the Qrops is an overseas public service pension scheme as defined at regulation 3(1B) of S.I. 2006/206 and the individual is employed by one of the employer’s participating in the scheme; and,
- the Qrops is a pension scheme established by an international organisation as defined at regulation 2(4) of S.I. 2006/206 to provide benefits in respect of past service and the individual is employed by that international organisation.
If an individual paid the charge but their circumstances changed within five years, they could be eligible for a refund.
With defined benefit (DB) pension transfer values having been incredibly high over the past few years, for example, it could mean a lot of money for some retirees.
