The Finance Bill is expected to receive royal assent within a matter of weeks, with the rules due to come into effect at the start of the new tax year on April 6.
Under the draft laws, savers will have an “overseas transfer allowance” of £1.073m. Beyond this point, the transfer can be taxed at a rate of 25pc.
Rachel Vahey, of the broker AJ Bell, said: “The way the rules are written in the Finance Bill, the overseas transfer allowance is separate from the lump sum allowance and death benefit allowance, and so wouldn’t be reduced by, say, someone taking their full tax-free cash.
“This could mean pension savers get two bites at the tax-free cash cherry – they could transfer some abroad and take up to their £268,275 from that pension, as well as taking up to their full £268,275 allowance from their remaining UK pension scheme.”
However, experts cautioned a flurry of interest in overseas pension transfers could open the door for scammers.
A wave of scams in the sector and tightening of regulation has meant that overseas pension transfers have already dropped from 13,400 a decade ago to just over 3,300 last year.
Mr Greer said: “Scammers always look for a way to game the system and this change provides people with a very real reason to listen to individuals that might not have their best interests at heart.”
Ms Vahey added that overseas transfers could be extremely complicated and anyone considering the move should seek regulated financial advice.
“Before rushing in, individuals should consider their overall financial objective,” she said. “They may be able to double their tax-free cash allowance, but it will mean taking money out of the inheritance tax sheltered pension and moving it into your estate.
“So there has to be a plan set up for what to do with that money, especially if the individual is already concerned by inheritance tax.”
A spokesman for HMRC confirmed that following April 6, lump sums paid by UK registered schemes will be considered separately from the overseas schemes.
Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.
