Plans to raise millions of pounds from retirement savers from the QROPS overseas transfer charge have flopped.
HM Revenue & Customs forecast a £125 million windfall for Treasury coffers from the charge in the in the 2017-18 and 2018-19 tax years.
Instead, the measure raised just £760,000 from only 24 savers last year and £1.4 million from 30 transfers the year before.
In 2018-19, 5,000 retirement savers transferred £640 million into QROPS pensions with each transfer averaging £128,000.
That means just 0.48% of QROPS transfers in the tax year attracted the charge.
What is the overseas transfer charge?
The overseas transfer charge is paid by expats moving money into an offshore QROPS pension when the scheme is based outside the European Economic Area (EEA) in a place other than the country where they live.
Expats in the EEA can have a QROPS offshore pension based in any EEA state.
For example, a British expat in Thailand moving retirement savings to an Australia QROPS would pay the charge, while an expat in Australia placing funds in a local QROPS would not.
The charge is levied as 25% of the value of the funds transferred into a QROPS.
The overseas transfer charge was introduced in March 2017 by then Chancellor Phillip Hammond as a deterrent for expats trying to avoid tax by shifting their pensions savings between countries.
Decline in transfers to QROPS
The figures were published by financial firm Canada Life from a freedom of information request to HMRC.
The firm’s technical director Andrew Tully said: “It looks like the QROPS charge has done the job in limiting the appetite for moving pensions outside the UK to destinations other than the EEA.
“The pension freedoms will also have had an effect in the general decline in the number of transfers to QROPS, simply because of the greater flexibility in how people can access their pensions in the UK.
“The number of pension transfers attracting a charge is a very small proportion of the overall number of transfers to QROPS, and as a result the amount of tax raised is very low.
“However, I’ve no doubt the Treasury will be pleased another tax loophole has effectively been closed and further tax leakage prevented.”