Chancellor Philip Hammond announced that British pensioners who have offshore pensions would be liable to pay more tax. This measure is being brought in to bring into line overseas pensions with those held in the UK.
Under the current rules, QROPS (Qualifying Registered Overseas Pension Schemes) are only subject to pay tax on 90% of the income they receive, but the new legislation will mean that 100% of the income received from the fund will be taxable – which is the same as is applicable for UK-based pensions.
The idea behind this is to make having an overseas pension – with the tax benefits they offer – less appealing.
The government logic is that as savers get tax relief on the money they put into the fund, it seems only fair that they should pay full tax on the money they receive from the fund
Under current regulations, a higher-rate payer is taxed at only 36%, but this will now rise to 40%.
QROPS have, for a long time, been used by scammers to convince people to move their pension pots abroad to avoid tax penalties that would ordinarily apply if pension funds were accessed early, before the age of 55.
The new rules come amongst other measures to cut down on pension scams including a ban on cold calling about pensions and investments.
Any individual or company that breaks the ban could face a fine of up to £500,000.