Pension tax loophole earmarked for change

Mon, 16 Jun 2008

Experts in the pensions sector are calling on the government to slam shut a tax loophole that currently allows rich pensioners to leave the UK and avoid tax, whilst still drawing from a UK pension .

Pension rules, introduced in 2006, allow wealthy people to transfer pension schemes abroad and convert the fund to cash after a five-year period, often tax free. The list of destinations approved for UK transfers include Switzerland, Australia and New Zealand, as well as Guernsey and Jersey.

The rules, known as the Qualifying Recognised Overseas Pensions Scheme has already seen many pension holders go overseas. Financial advisers have spotted the loophole, and experts suggest thousands could be advising their clients to take advantage.

The tax structure of UK pensions remains complex.
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