Pensions administration specialist Trafalgar House has called for tax penalties if pension fund members move abroad to save money.
Trafalgar House said that pension funds and the government face unnecessary costs from overseas pensions transfers. Alan Berry, service delivery manager at Trafalgar House, commented: “The UK pensions industry has long had a paternal approach to transfers – voluntarily maintaining a costly and complicated registration process for overseas schemes to ensure the safe passage of member funds abroad. But in our experience, despite the number of requests very few people move their permanent residence to Malta or the other popular destinations – it is simply the lure of a better tax deal that is driving these transfers. In difficult economic times, it is odd that the UK should continue to bear the cost of losing investment and tax revenue.”
Berry said that tax relief given to pension fund members should be dependent on the money remaining in the UK to help fund their retirement. “If the member thinks they can get a better deal elsewhere, that’s fine – but they should forfeit this UK-specific benefit and pay the tax relief back on the transfer.”
Levying a 55% change on a member’s pension pot if it is moved abroad would stop many pension scams and deter people looking to avoid tax, Berry said. He added that for a government looking to cut costs and secure all the tax revenue that it can, this would be a piece of very low-hanging fruit to pick.