George Osborne's decision to reduce the Lifetime Allowance (LTA) from £1.5m to £1.25m from 6th April is prompting a growing number of the estimated 4.7 million British expatriates to move their pensions out of the UK, reveals one of the world's largest independent financial advisory organisations.
deVere Group, which has 80,000 mainly expat clients worldwide, reports a 35 per cent increase in the number of clients enquiring about transferring pensions into Qualifying Recognised Overseas Pension Schemes (QROPS) in January, compared to the previous month.
The news comes three weeks after the firm confirmed a 15 per cent year-on-year increase in the number of clients transferring pensions into HMRC-recognised QROPS, between 2012 and 2013.
Last month's upsurge in demand, says the company, is due to growing numbers of British retirees living overseas keen to beat the effects of the LTA reduction.
Nigel Green, deVere Group's founder and chief executive, comments:
"As more and more expats become aware of how they could be hit by changes to the LTA limit, a growing number of them are taking steps to mitigate the effects by seeking advice on QROPS.
"From April 6th, the amount that can be saved tax-free in a pension will fall by £250,000. The reduction in the LTA threshold will put those with retirement funds over this limit at risk of facing taxes of up to 55 per cent.
"Naturally, this is an alarming prospect for these people, who have, it can be reasonably assumed, worked hard and saved hard all their lives in order to be able to enjoy their desired retirement."
He continues: "When a UK pension is transferred into a QROPS it is tested against the LTA at that time of transference. This is why, we believe, a growing number of expats – as they are the ones able to do so – are enquiring about QROPS now ahead of April 6th when the Lifetime Allowance drops from £1.5m to £1.25m.
"Once the retirement funds are outside the UK, they will be exempt from the LTA limit – even if the pension pot increases beyond £1.25m in the future. This is potentially hugely advantageous as it is being mooted by some politicians to reduce the LTA even further over time."
Mr Green adds: "It is likely that more people than many might expect will be adversely affected by the new LTA limit because the tax will also apply as values of portfolios increase."