The rules for transferring a UK pension fund to a QROPS offshore pension are specially written to make sure no tax or other penalties apply.

So, shifting cash from one or more UK pension funds to consolidate the money in a single QROPS pension triggers no tax charges – providing the pensions schemes swapping the money are both registered with the taxman.

The transfer between the schemes is not a contribution, so tax relief is not added to the QROPS or deducted from the funds that are switched.

This is important for many pension savers because it means any contributions in to a UK pension attracted tax relief that increased their retirement savings remains in the fund when transferred out of the UK in to a QROPS pension.

This rule recognises that the contributions already made met the rules for receiving tax relief and the transfer is merely relocating where the funds are held and not a reconsideration of their eligibility for tax relief.

Pension fund transfer values

The value of the transfer fund is part of the annual allowance calculation for the year in which the transfer takes place.

Transfer values are a key point to watch in any pension transfer – whether between UK schemes or offshore.

Anyone contemplating a QROPS transfer should request a transfer value calculation from a UK pension provider before starting the transfer process. This calculation fixes the amount available to move offshore and lays out any charges involved.

In most cases the transfer value will be less that the pension fund value.

QROPS transfers that need careful consideration

In most cases, the transfer fund and the value of any other assets switched in the pension input period are calculated at market value at the date of transfer.

This includes defined benefit schemes, even though the question rarely arises because defined benefit schemes pay index-linked benefits that are lost on a transfer of funds.

A transfer to a QROPS is not generally a benefit crystallisation event for a saver’s lifetime allowance.

Don’t include the UK state pension in any transfer calculations - technically, it’s not a registered pension scheme and only fund switches between registered schemes are allowed.