What is the Overseas Transfer Charge (OTC)?
Overseas Transfer Charge (OTC)?
We receive many enquiries from individuals looking to transfer their UK pension overseas, who want to know what the Overseas Transfer Charge is and if they would be subject to it when transferring their UK Pension.
In this article, we will cover the Overseas Transfer Charge and highlight the main criteria you must meet if you are to avoid this charge when transferring your UK Pension overseas.
In the 2017 UK Budget, the Chancellor of Exchequer announced that any UK pension plans transferring to a Qualifying Recognised Overseas Pension Scheme (QROPS), made after 9 March 2017, would be subject to an Overseas Transfer Charge (OTC) of 25% if the transfer did not meet certain conditions.
You must meet one of the following conditions in order to be exempt from the charge :
- You must be a resident in the same country in which the QROPS you are transferring to was established.
- The QROPS was set up by an international organisation for the purpose of providing benefits for, or in respect of, past service as an employee of the organisation and you are an employee of that international organisation. It does NOT simply mean a multi-national employer.
- The QROPS is an overseas public service pension scheme and you are an employee of an employer that participates in the scheme.
- The QROPS is an occupational pension scheme and you are an employee of a sponsoring employee under the scheme.
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Can this charge be claimed back?
In certain circumstances, yes!
- If you become a tax resident in the same country that the QROPS has been established, within 5 years from the date of the transfer, then a claim to HMRC can be made.
- If you become an employee of an organisation sponsoring an occupational pension which qualifies as a QROPS.
Why was the Overseas Transfer Charge introduced?
Simply to deter individuals from transferring their pension out of the UK to a jurisdiction with a more favourable tax regime or in other words, to stop tax avoidance. Some jurisdictions offer much more tax advantageous rules and so by introducing this tax charge, it ensured that the government was able to recoup some lost tax revenue.
Careful consideration should always be taken when transferring a pension plan overseas and we would always recommend that you seek professional financial advice before doing so.
If you have any further questions regarding the Overseas Transfer Charge or any other pension-related matters, contact us today and a member of our team would be happy to help.
This article does not contain personal or financial advice. It is provided for general information only and does not take into account your personal objectives, financial situation or needs. IVCM is not authorized to provide you with any personal or financial advice.
If you require financial any advice then you must make sure that you obtain advice from a suitably qualified financial adviser.