The latest changes to the Finance Act 2004 were announced and became immediately effective on 8th March 2017. From that date a 25% Overseas Transfer Charge (OTC) will be levied on transfers as they leave the UK unless one of the five following conditions are met.
The member is tax resident in the same jurisdiction as the QROPS is established at the date of the transfer
Member is tax resident in the EEA or the QROPS is established in EEA
The QROPS is an occupational scheme and the member is an employee of the employer sponsoring the scheme
The QROPS is a Public Sector Scheme and the member is an employee of the employer sponsoring the scheme
The QROPS is set up by an International Organisation and the member is an employee of the employer sponsoring the scheme
As Soteria is an occupational retirement scheme the OTC is not payable on any inbound transfers. There are a number of complexities and rules surrounding OTC and which remain in place for a period of five years following the transfer. In simplified terms, if a member decides to transfer his benefits out of Soteria during the relevant five year period then the OTC may become payable. Whether OTC is paid under those circumstances is dependent on the residency of the member, his employment status and the jurisdiction in which the latest QROPS is established. It is important that members are aware of OTCâ€™s reach at outset and that the various permutations are individually discussed with your professional advisers.
If, having paid the OTC at outset, a QROPS member decides to transfer his pension benefits back to a UK scheme then a full reclaim of OTC can be made. A reclaim of OTC can also be made if at any time following a further transfer any one of the above five conditions are met.
If a QROPS member who, having fulfilled any one of the above five condition at outset, and therefore didnâ€™t pay OTC, decides to transfer his pension benefits back to a UK scheme at any point during the relevant period then there will not be OTC liability.
This final rule gives those who are perhaps uncertain of their residency status for five years following a transfer, or those whose circumstances change during that relevant period, the comfort and opportunity to transfer the QROPS back to a UK scheme without ever having to pay OTC.