PTM102530 - Transfers: transfers to a QROPS: examples of calculating the amount of the overseas transfer charge on transfer from a registered pension scheme
Glossary PTM000001
Transfer below available overseas transfer allowance, overseas transfer charge under section 244AC paid by deduction from the transfer
Transfer above available overseas transfer allowance, overseas transfer charge under section 244IA deducted from the member’s funds
Transfer below available overseas transfer allowance, transfer not reduced for overseas transfer charge under section 244AC
Transfer above available overseas transfer allowance, transfer not reduced for overseas transfer charge under section 244IA
Example for non-UK registered pension scheme
Transfer below available overseas transfer allowance, overseas transfer charge under section 244AC paid by deduction from the transfer
Kiki has pension rights valued at £500,000 under a UK-based registered pension scheme. Kiki has not previously made
any transfers to QROPS and did not use up any of her lifetime allowance before
6 April 2024, so she has 100% of the overseas transfer allowance (£1,073,100) available to her. She wishes to transfer
her pension rights to a qualifying recognised overseas pension scheme (QROPS). None
of the exclusions from the overseas transfer charge apply.
As none of the exclusions apply, the transfer will be subject to an overseas transfer charge under section 244AC. The scheme administrator will deduct the amount of this overseas transfer charge before transferring the remaining funds to the QROPS scheme manager.
As the overseas transfer charge is to be paid by reducing Kiki’s transfer:
The ‘transferred value’ = £500,000
The overseas transfer charge under section 244AC = £500,000 @ 25% = £125,000
Amount received by the QROPS = £500,000 – £125,000 = £375,000
Transfer above available overseas transfer allowance, overseas transfer charge under section 244IA deducted from the member’s funds
Ivor has £800,000 available overseas transfer allowance. In August 2024 Ivor decides to move his uncrystallised pension savings from a UK-based registered pension scheme to a QROPS based in Sweden, where he lives. The scheme administrator tells Ivor that his pension rights under the scheme are worth £950,000, so they can see that the transfer will exceed his available overseas transfer allowance. As Ivor lives in the same country as that in which the QROPS is established, the transfer will be excluded from an overseas transfer charge under section 244AC. However, as the transferred value is more than Ivor's available overseas transfer allowance, the excess will be subject to an overseas transfer charge under section 244IA. The scheme administrator will fund the payment of this overseas transfer charge by deducting the tax due from the amount of Ivor’s pension savings to be transferred.
As the overseas transfer charge is to be paid by reducing Ivor’s transfer:
‘Transferred value’ = £950,000
Available overseas transfer allowance = £800,000
The overseas transfer charge under section 244IA = (£950,000 - £800,000) @ 25% = £37,500
Amount received by the QROPS = £950,000 - £37,500 = £912,500
Transfer below available overseas transfer allowance, transfer not reduced for overseas transfer charge under section 244AC
Dougal wants to transfer a pension fund of £100,000 from his UK-based registered pension scheme to a QROPS. Dougal has not previously
made any transfers to QROPS and did not use up any of his lifetime allowance
before 6 April 2024, so he has 100% of the overseas transfer allowance
(£1,073,100) available to him. None of the exclusions apply to this
transfer, so it is subject to an overseas transfer charge under section 244AC,
but Dougal’s scheme administrator does not deduct the tax due
from his transfer.
As the overseas transfer charge is not deducted from the funds to be transferred, the transferred value is the aggregate of the ‘chargeable portion’, the ‘gross-up amount’ and the ‘non-chargeable portion’ (if any) :
- Chargeable portion = £100,000
- Gross-up amount = £100,000/3 = £33,333
- Non-chargeable portion = nil
Therefore, the transferred value = £133,333
Overseas transfer charge under section 244AC = £133,333 @ 25% = £33,333
Amount received by the QROPS = £100,000
Transfer above available overseas transfer allowance, transfer not reduced for overseas transfer charge under section 244IA
Murray has an available overseas transfer allowance of £775,000 and pension savings of £1.5 million under a UK-based registered pension scheme. He decides to transfer these funds to a QROPS based in Austria, where he also lives. The transfer is excluded from an overseas transfer charge under section 244AC, but it will be subject to a charge under section 244IA. The scheme administrator of Murray’s scheme pays this tax charge but does not deduct the tax due from his transfer.
- Chargeable portion = £1,500,000 - £775,000 = £725,000
- Gross-up amount = £ 725,000/3 = £241,666
- Non-chargeable portion = £1,500,000 - £725,000 = £775,000
Therefore, the transferred value = £1,741,666
Overseas transfer charge under section 244IA = (£1,741,666 - £775,000) @ 25% = £241,666
Amount received by QROPS = £1,500,000
Example for non-UK registered pension scheme
Zsa Zsa is a member of a scheme that is established in Germany and the scheme is also a registered pension scheme. As Zsa Zsa worked for some years at her employer’s UK branch she has pension savings that benefited from UK tax relief. Zsa Zsa’s total pension savings under the scheme are £800,000 of which £200,000 are UK-relieved funds.
Zsa Zsa wishes to transfer her savings to a QROPS and this transfer will be subject to an overseas transfer charge under section 244AC. The amount of the charge is to be deducted by the scheme administrator before the funds are passed to the QROPS scheme manager.
The overseas transfer charge provisions are limited to Zsa Zsa’s UK–relieved funds.
Transferred value = £200,000 (amount of UK-relieved funds)
Overseas transfer charge under section 244AC = £200,000 @ 25% = £50,000
Amount received by the QROPS = £800,000 - £50,000 = £750,000