Pensioners planning to retire in Europe face losing 25 per cent their savings after Rachel Reeves moved the goalposts on tax.

Pensioners face 25 per cent charge after little-known tax loophole closed by Labour

by · Birmingham Live

Pensioners retiring abroad face a 25 per cent charge after- a little known tax loophole change in the new Labour Party government's Budget. Pensioners planning to retire in Europe face losing 25 per cent their savings after Rachel Reeves moved the goalposts on tax.

Savers could previously transfer up to £1,073,100 of pension funds to most European countries tax-free. But the Chancellor changed the rules during her October 30 Budget – with immediate effect. People now have to be resident in the same country as the QROPS they’re transferring to if they want to escape the charge.

The immediate change has affected ex-soldiers and created major challenges for those managing overseas pensions, it is feared. Mike Ambery, of pension firm Standard Life, said: “It stops people planning in advance and it makes it difficult for the majority of people moving their finances around to where they want to live in the future. If [for example] members of the Armed Forces want to move their money, they will have to wait until they move to that country.

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“If you were part of the way through the process with a financial adviser, it’s hard luck. You’re now going to have to think of something else to do with your money before you leave.” Andrew Tully, of investment advisers Nucleus, said: “The need for this QROPS change follows on from the abolition of the lifetime allowance.

“It’s a reminder of how poorly the abolition of the lifetime allowance has been implemented that we still need further regulatory change six months later.” The change does not apply to transfers that were made before October 30 this year.

Over 7,000 savers had transferred over £1billion to overseas schemes last year before the rules changed. Previously, savers could transfer a lot of pension funds to qualifying recognised overseas pension schemes (QROPS) within the European Economic Area or Gibraltar without facing penalties.