Tax on Enhanced Transfer Value offer

NFO

I have just been offered a enhanced payment to withdraw from an small Final Salary Scheme.

However due to my circumstances the company is stating that there will be a 55% tax deduction by the HMRC on the transfer if it goes to an unauthorised account so far as the TERBS value is concerned.

My cirumstances are
1. I do not live in the UK.
2. I hold no other pension scheme. I have covered my future retirement needs by investment in buildings.

Other points
The transfer value has been reduced by over 50% due to lack of funding anyway.

Is this normal.

EdInvestor

Google "QROPS".

You will probably need to transfer the pension into one of these in your country of residence or elsewhere offshore in order to avoid the tax penalty.

NFO

Can I transfer the Transfer Value (which has been reduced by over 50% due to poor funding of the scheme) and the enhanced payment. to a QROPS

Can I access those funds in any way.

We are not talking large figures
Reduced transfer value is £40000
Enhanced payment is £15000

MikeJones_2

Hi NFO,

NFO wrote: »

...However due to my circumstances the company is stating that there will be a 55% tax deduction by the HMRC on the transfer if it goes to an unauthorised account so far as the TERBS value is concerned...

That would be correct. Transfer to any other registered pension scheme though would not incur the charge. Some good reading here at HMRC's Registered Pension Schemes Manual:

RPSM14200000 - Member Pages: Transfers: Contents
Transfers: Contents

RPSM14200010 Can I move my fund or pension rights?
RPSM14201000 What can be transferred?
RPSM14202000 Where can I transfer my pension rights to?
RPSM14203000 How do I arrange a transfer?
RPSM14204000 When can I transfer?
RPSM14205000 What are the tax consequences?
RPSM14206000 What happens after the transfer?

NFO wrote: »

Other points...
The transfer value has been reduced by over 50% due to lack of funding anyway. Is this normal.

That's the biggest reduction I've seen in recent years. If the scheme is in deficit the sponsoring employer will have agreed a plan to make good the shortfall (normally restricted to a 10-year repayment plan but could be more).

Think very carefully therefore whether swapping 50% of your pension now for the enhancement is a worthwhile trade.

It's becoming much more popular. See:
- Large caps forge ahead with ETVs

There's a useful Factsheet here:
- Cash Incentives to Transfer – Preserved Members

In your situation and from what you have described I'd strongly recommend you seek advice from a specialist IFA familiar with occupational pension transfers and QROPS.

Hope that helps?

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.