Guidance

Transfer a pension scheme member's savings

Moving an individual's pension fund from one scheme to another and guarding against pension liberation.

Overview

A member has the right to move their pension. There are no unauthorised payment tax charges if the transfer is:

  • between registered pension schemes
  • a ‘recognised’ transfer to a qualifying recognised overseas pension scheme (QROPS)

However a transfer from a registered pension scheme to one that isn’t registered, or is not a QROPS, can attract tax charges and sanctions for both the member and the scheme administrator.

Transfers and pension liberation

Normally a member can only take money from their pension once they’re aged 55 or over. Some companies are marketing schemes that claim to let members gain early access to their pension pot. This could be something like borrowing from the member’s pension fund before they retire. This is commonly known as ‘pension liberation’ and can result in unauthorised payments being made from the pension scheme. Early access to pensions is rarely in anyone’s long-term financial interests and can carry tax charges of more than half the unauthorised payment.

Because of an increase in pension liberation activity transferring schemes often ask HM Revenue and Customs (HMRC) to confirm the registration status of the receiving scheme as part of the checks they undertake before making a transfer.

Your scheme wants to receive a transfer

One of HMRC’s functions is to protect the integrity of the tax relief afforded to pension savings. Increasing pension liberation activity is putting the integrity of this relief at risk. Transfers between schemes are an important component of pension liberation arrangements.

To ensure that HMRC safeguards tax compliance and tax revenues it has changed how it deals with requests for confirmation of the receiving scheme’s registration status. HMRC will now respond to requests for this information without seeking consent from your scheme.

HMRC will only confirm the registration status of a receiving scheme where both of the following apply:

  • the scheme is registered
  • HMRC doesn’t hold information to suggest that there’s a significant risk of the scheme being set up or being used to allow pension liberation

If we get a request for information on the registration status of your scheme, we will review your scheme.

Responses to registration enquiries

HMRC will give one of the following responses to the enquiry:

Response 1

HMRC confirms that at this time, both of the following apply:

  • the receiving scheme is registered with HMRC and is not subject to a deregistration notice, and
  • the information held by HMRC does not indicate a significant risk of the scheme being set up or being used to allow pension liberation

Response 2

HMRC only provide confirmation of registration status when both of the following apply:

  • the receiving scheme is registered with HMRC and is not subject to a deregistration notice, and
  • the information held by HMRC does not indicate a significant risk of the scheme being set up or being used to allow pension liberation

At this time one or both of these conditions does not apply. HMRC is therefore unable to provide the confirmation you have requested.

HMRC concerns about the receiving scheme

If HMRC identifies any concerns we’ll contact the receiving scheme before we issue response 2, giving them the chance to resolve any issues before responding to the scheme that made the request.

Examples which may concern HMRC are:

  • the tax affairs of the scheme, its administrator or members are currently under consideration by HMRC for matters relating to pension liberation
  • HMRC has reason to suspect the scheme has made or proposed investments that have previously been used to release assets from a pension scheme
  • the scheme demonstrates one or more of the warning signs set out in The Pension Regulator’s pension liberation fraud awareness leaflet
  • one or more of the names of the scheme or administrator or establisher or practitioner cause concern
  • the scheme or administrator or establisher is linked to a website that could be viewed as offering tax free cash
  • HMRC has received numerous requests to confirm the status of this scheme
  • the promoter or practitioner is currently under enquiry with HMRC for reasons other than:
    • repayment claims
    • relief at source claims
    • annual allowance
    • lifetime allowance
    • accounting for tax
    • property (commercial and residential)
    • rent arrears
    • scheme borrowing

If the issues can’t be resolved within 3 months we’ll issue response 2 to the scheme that made the original request. We won’t provide any details of the outcome to the receiving scheme.

Your scheme has a member wishing to transfer their pension

If you need to confirm the status of the receiving scheme you must write to Pension Scheme Services.

It may be several months after your initial request before you get a response from HMRC. You should bear this in mind when considering the timing of your request.

Getting confirmation from HMRC shouldn’t be the only check you make and rely upon when deciding whether or not to make a transfer. You should make further checks to satisfy yourselves that a transfer should be made.

Confirmation from HMRC on a scheme or product shouldn’t been seen as a recommendation.

Overseas transfers

A member can choose to move their UK pension savings overseas. The UK scheme administrator and the member must check if tax applies to the transfer.

HMRC publishes a list of schemes that have self certified as a ROPS, but appearing on the list isn’t a guarantee that the scheme is in fact a ROPS. When considering a transfer of pension savings overseas, it is the responsibility of the member and their UK pension provider or adviser to check whether the overseas pension scheme complies with local domestic regulations and continues to comply with HMRC requirements before transferring.

If a transfer is made and it later turns out that the scheme is not a ROPS, the member will have to pay tax of at least 40% of the value of the fund – see sections 208 and 209 of the Finance Act 2004.

For transfers to be recognised, the receiving scheme must meet both the following conditions:

  • it must be a pension scheme that is a recognised overseas pension scheme (ROPS), meaning that there must be certain provisions set out in the law of the country in which the scheme is established - all the necessary requirements are set out in Statutory Instrument 2006/206

  • the scheme must self certify to HMRC that it is a ROPS and must also give certain undertakings and not be excluded from being a qualifying recognised overseas pension scheme (QROPS) - these conditions are set out in section 169(2) of the Finance Act 2004

However, even where the overseas transfer is a recognised transfer, you’ll have to pay 25% unless the:

  • transfer is formally requested before 9 March 2017
  • member is resident in the same country in which the QROPS receiving the transfer is established
  • member is resident in a country in the European Economic Area (EEA) and the QROPS is established in another country in the EEA
  • QROPS is an occupational pension scheme and the member is an employee of a sponsoring employer under the scheme
  • QROPS is an overseas public service scheme and the member is employed by an employer that participates in that scheme
  • QROPS is a pension scheme of an international organisation and the member is employed by that international organisation

You should automatically deduct the overseas transfer charge if you don’t receive information from your member within 30 days of them requesting the transfer, you can use form APSS263 to request this information from your member.

All overseas transfers must be reported to HMRC, if the transfer isn’t taxable, you must tell us why. If the transfer is subject to the overseas transfer charge, you should use form APSS262, as well as the usual reporting requirements, you must also give:

  • details of the gross amount of transfer
  • the amount of tax deducted
  • the net amount of transfer

You must pay the tax due to HMRC and account for it on the accounting for tax return.

The information must be provided to both the overseas scheme manager and overseas scheme member even if the transfer is tax free. You must tell them that the transfer is tax free, the date of the transfer and the reason that the transfer wasn’t taxable.

Published 16 September 2014
Last updated 8 March 2017 + show all updates
  1. Information regarding the overseas transfer charge has been added.
  2. Paragraph added on Overseas transfers
  3. First published.