The recently implemented tax on certain overseas pension transfers has generated far less revenue than anticipated by the government.
The government introduced a 25 per cent transfer charge in the March 2017 Budget, saying the measure supports its objective of promoting fairness in the tax system.
The charge applies to transfers to qualifying registered overseas pension schemes unless they are made within the European Economic Area or the Qrops is provided by the individual’s employer.
A Freedom of Information Act data request filed by Canada Life shows 30 overseas transfer charges were paid to HM Revenue & Customs worth £1.4m in the 2017/18 tax year while the government expected the charge would raise £65m.
HMRC data shows pension transfers to Qrops peaked in 2014/15 with 20,100 transfers valued at nearly £1.8bn as the number of transfers has reduced substantially over the following tax years.
For 2016/17, HMRC recorded 9,700 transfers worth £1.2bn and for the 2017/18 these numbers fell by 52 per cent to 4,700 transfers worth £740m.
Canada Life pensions technical director Andrew Tully says: “Going by the low number of transfers where a charge has been applied, it would appear many people have had second thoughts about moving their pension overseas.
“The pension freedoms may also have had an impact on the general decline in the number of transfers to Qrops as there is much greater flexibility in how people can access their benefits in the UK.”
In March the government said it would not weaken the current advice requirement on overseas pension transfers which requires that members with benefits over £30,000 living overseas must receive financial advice like members resident in the UK.