Offshore pensions face Autumn Statement tax clampdown

British residents who hold offshore pensions will be forced to pay more tax under new plans proposed by the Government.

Hidden in last week’s Autumn Statement was a move to bring into line the taxation of overseas and UK pensions.

Currently, people who take an income from “qualifying registered overseas pension schemes” (Qrops) pay only 90pc of the income tax normally due on income produced by the fund.

But the latest proposals will mean 100pc of income tax will apply, mirroring the tax treatment of UK pensions.

The move is designed to make it less appealing for pensioners to move their pension pots overseas and cut their tax bill.

The Government argues that as it has contributed tax relief on the savings, it has an entitlement to income tax paid when the pension money is drawn.

Under current rules a higher-rate taxpayer would be taxed at only 36pc but this will become 40pc under the plans, explained Jon Greer of Old Mutual Wealth, the pension company.

Qrops have also been used to facilitate “pension liberation” scams, where savers and advisers attempt to dodge HMRC tax penalties that apply if pensions are accessed early, before the age of 55.

The Chancellor’s statement also announced measures that will make it harder to set up Qrops in future.

The raft of changes comes amid a broader clampdown on pensions scams.

Following pressure from this newspaper, the Government announced a ban on cold calling about pensions and investments.

Firms that break the ban face fines of up to £500,000.

Fraudsters are estimated to make 250 million unbidden calls a year.

Moving pensions overseas will become less attractive