Savers could potentially DOUBLE the tax-free amount they can withdraw from their pensions, due to a potential new loophole created under incoming rule changes in the Finance Bill.
There is a little quirk in the legislation surrounding lump sum pension payments from UK pensions and overseas retirement arrangements. whereby, savers could have the opportunity to take 25% tax-free lump sums from BOTH a UK pension scheme and a qualifying recognised overseas pension scheme (QROPS).
This means that the tax-free allowance could be up to £536,550.
This is double the current permitted maximum. Which is 25% of the previous lifetime allowance of GBP 1,073,100 – (unless you have LTA protection in place)
It seems the new rules relating to the payment of lump sums have been written in such a way that the overseas pension lump sum allowance is separate from the lump sum allowance from UK schemes.
This could potentially mean that pension savers could take two lots of tax-free cash. One from each scheme. As the rules are distinct from one another.
Changes in the bill will effectively double up the allowance for very wealthy savers who already have pensions overseas, or for those who can move a portion of their savings abroad.
According to a recent article in the Telegraph, a spokesman for HMRC confirmed that following April 6, lump sums paid by UK-registered schemes will be considered separately from overseas schemes.
But this potentially opens up a very big can of worms! With savers rushing into decisions that could have serious implications surrounding inheritance tax. Or potential tax charges on the QROPS transfers themselves. It is also an area that is very likely to see a new wave of scams.
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