Transferring money from a UK pension to an offshore Qualifying Recognised Overseas Pension Scheme (QROPS) may become cheaper over the coming months.
Flexible access pension rules demand that anyone over 55 years old with a retirement fund of more than £30,000 has to take independent financial advice before moving their money.
That includes transferring the cash from the UK to one of more than a thousand QROPS worldwide.
In February, The Treasury published statistics showing too many people were discouraged from switching their pensions to other UK schemes offering flexible access or to offshore QROPS because the cost of advice and exit fees charged by providers were too high.
The Financial Conduct Authority (FCA) has already instructed financial adviser to include QROPS advice in their retirement recommendations to any pension saver who may be considering moving overseas.
Thousands face rip-off charges
Now, the FCA has confirmed that a market review will take place to collect data to help the government draft new laws to cap pension exit fees.
The earlier inquiry revealed 670,000 retirement savers aged over 55 faced exit charges for cashing in or transferring their pensions under flexible access.
The scale of charges was:
- 358,000 faced charges of up to 2% of the fund withdrawal or transfer
- 165,000 were expected to pay between 2% and 5%
- 81,000 had exit charges of between 5% and 10%
- 66,000 faced charges of more than 10%
Chancellor George Osborne said: “I am not going to stand by and see thousands of people who have worked hard to save for their retirement be ripped off or blocked from accessing their own money by financial firms.”
Expats discouraged from QROPS transfers
Many expats with UK pensions who want to transfer to a QROPS face paying exit charges to their pension provider, which is thought to discourage many from switching to the offshore pensions.
This could mean expats miss out on the tax, investment and foreign exchange benefits of a QROPS.
“We want to make sure that the new rules reflect the best financial outcomes for consumers, given their financial circumstances, said an FCA spokesman.
“We expect to launch the review later this year and pension switching will definitely be one of the matters included.”