According to Old Mutual Wealth, such high values demonstrate the importance of recognised overseas pensions as a solution in the current market.
The Finance Bill, which was issued on 5 December 2016, confirmed the intention of the government to level out how income is taxed and how money is taken via pension freedoms, from recognised overseas pension schemes to bring them into line with UK registered pension schemes.
A total of 100 per cent of the income received from a recognised overseas pension scheme by an individual who is UK resident for tax purposes will be subject to UK income tax, bringing it into line with the taxation of income from UK registered pension schemes, from 6 April 2017.
Only 90 per cent of such recognised overseas pension schemes income is subject to UK income tax at present, meaning higher-rate payers are taxed at only 36 per cent.
Under the new rules this will become 40 per cent.
A proposal referred to in the Foreign Pension Schemes policy paper issued on 5 December relates to allowing recognised overseas pension schemes to operate the same pension freedoms as UK registered pension schemes.
Some recognised overseas pensions are limited in the pension benefits they provide, as a minimum of 70 per cent of the pension fund needs to provide an income for life.
According to Old Mutual Wealth, the policy paper proposes these schemes are no longer restricted by the 70 per cent rule and will continue to qualify as a recognised overseas pension so long as the provider of those schemes is regulated or the scheme itself is regulated.
Old Mutual Wealth stated this was "potentially good news for consumers" and "will ensure greater consumer protection" for recognised overseas pension schemes.
The draft Finance Bill issued alongside the policy paper does not address the issue of the 70 per cent rule, of which more details are to come.
Old Mutual Wealth noted it expects to see similar provisions on the removal of the 70 per cent rule for inheritance tax exemptions for recognised overseas pensions, but these have not been issued yet.
Rachael Griffin, personal financial planning expert at Old Mutual Wealth, said the industry figures show a significant growth in the Rops market since these schemes were introduced in 2006.
She said: "That growth has started to level off, albeit with a short spike in 2014 and 2015. This suggests that the market is maturing at around £1.5bn a year. The average size of a Rops transfer is more than £100,000, highlighting the importance of these cases from a UK tax revenue perspective.
“Equalling out the tax treatment of UK and foreign pension schemes has been much anticipated. There remain clear advantages to using Qrops for people who are at risk of reaching the lifetime allowance limit on their UK registered pension scheme, and looking to move permanently overseas.
"Qrops have become a mainstream pension solution for expat clients and we see this continuing.”
Earlier this month, HM Revenue & Customs' sudden removal of all but three Canadian qualifying recognised overseas pension schemes from its official list sparked warnings of a clampdown on non-compliant Qrops.
At that time, Montfort International's Geraint Davies, a financial planner specialising in British expatriates, said a large number of Qrops in jurisdictions around the world were likely to be non-compliant.
He told FTAdviser today (7 December) said: "We predict that the number of Rops sold will be slashed, if not it will surely evidence what we have seen for years that the wonderful concept of Rops has been abused by ill trained policy floggers overseas.
"Ask HMRC whether they see Rops as a product and they will say it is not and that it is a facility available so long as all conditions are met.
"They are not product checkers and conditions have not been met – just look at Australia and Canada and France and Italy. Schemes purporting to be Rops were not Rops.
"In recent days we have seen a whole raft of measures that will curtail transfers, if the numbers are not cut by 75 per cent in 2017 then we can only conclude that mis-selling is rife."
ruth.gillbe@ft.com
